NaAtMaD – News and Articles that Make a Difference

News, Articles, Announcements, Reports related to Indian Economics and Corporate World

Residential developers offering freebies, discounts

Posted by Yogesh on Tuesday, 7 October, 2008

BANGALORE: Rising property prices and increased interest rates, coupled with a demand-supply mismatch has brought down the overall affordability of residential properties in the country today forcing developers to resort to offering feebies and early bird discounts to arrest fall in sales, according to a recent report.

The economic slowdown which has mainly affected suburban and non-metro locations has led to some developers coming up with innovative schemes like “Book Now and Pay Later on Possession” as well as home loan instalment payment for the initial two years, a report by Cushman and Wakefield said.

A few high-end residential projects in Chennai have also marketed their property with unique concept of an unlimited and unconditional complete structural guarantee against leaks and cracks and a lifetime warranty for standard fixtures.

However, established developers with substantial cash reserves have up till now remained insulated from this trend.

The current short-term stagnation in commercial and residential activity in India has led to an overall reduction in the number of land transactions with developers deferring their decisions to occupy additional land reserves.

However, the economic slowdown is not expected to affect reputed developers as much as small time operators, even leading to consolidation of the industry by bigger players.

Private Equity (PE) funds have adopted a cautious approach towards the kind of projects they pick up and there is an increased emphasis on the reputation of developers, making it difficult for lesser known players to raise funds. This has led to availability of suitable investment terms for funds.

This year investments have diversified across asset classes, with the highest share going to the residential (41 percent) and township (21 percent) sectors with the quantum of investment in the range of Rs 128,600 million.

With the market conditions changing over the first half of 2008, investors have become cautions and have chosen to remain in tier one cities where market trends are more definite. PE investments in tier three cities were estimated to be about 40 percent of the total quarter four of 2007. However as of mid August the tier three cities recorded nil PE investments.

As a result there is marked reduction in investors interest in projects across tier two and tier three cities.

Bangalore and Hyderabad have been able to attract maximum “SPV” deals followed by Mumbai and Delhi NCR.

Region wide distibution of PE deals shows that western (37 percent) and southern (32 percnt) accounted for almost 70 percent of the investment followed by northern region at 26 percent. South Zone has seen the maxiumum number of deals (24) and the avreage size of deals being 2,800 million.

The report also states that commercial supply superceded demand. During the first six months of 2008, the seven major cities in India witnesed commercial office space supply over and above the space uptake, validating a temporary slump in the economy and in the realty sector at large.

However there were also instances like Chennai and Bangalore where the first half of 2008 saw an increase in demand over the same period last year.

In order to ride over the economic slowdown, several corporates have deferred their expansion plans. Some small time and medium players in select cities have been selling their projects to big developers to tide over. Source The Economic Times


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: