Rescuing Real Estate: Customers set for Discounts on Festive Season
Real estate companies might opt to offer discounts in order to clear their inventory at a fast rate.
Taking a cue from the upward revision in repo rate by the Reserve Bank of India, it is quite likely that the real estate developers will soon be offering discounts on the real estate, especially to gain on the emotional muscle in the upcoming festive season as they struggle to clear the real estate inventory.
This is a right move and comes, especially at a time when real estate demand is low and at the same time the interest rates are moving upwards. It is important to note that banks such as HDFC, ICICI Bank and Axis Bank and even the SBI have raised interest rates on home loans and additionally the RBI has also raised the rate at which the central bank lends money to commercial banks by 25 basis points.
All this is adding fire to the distress within the real estate segment now. Hence offering discounts is a good option in front of the realtors and can surely take them out of the woods and give them a space to breathe and move on to their the planning of next project. Also from an end customer point of view, they can get a special discount and gain on the long term.
According to industry estimates, the festival season such as Diwali, usually generates about 20% of the annual home sales. However, this kind of demand has been severely hit for this year, primarily because of the on going economic downturn, higher inflation and job cuts in several sectors. In such a scenario, spurring increase in interest rates can only add to the industry’s woes.
As per the industry experts, it is quite obvious that if interest rates go up, demand will be impacted slightly. And additionally, residential home price points fell in 22 of the 26 cities in the quarter to June, according to the National Housing Bank’s residential housing index, Residex. Moreover, according to property research firm Liases Foras, close to 670 million sq ft of stock is lying unsold with developers as home sales have fallen over the past few quarters. This is not a good scenario for the real estate segment and hence prompting the realtors to resort towards giving discounts to their end customers.
As Real estate demand has been hit this year due to the economic slowdown, higher inflation and job cuts in several sectors. Builders are looking forward to selling their unsold units by devising innovative schemes and discounts.
Additionally a number of real estate developers are ideally positioned to announce new set of schemes for their existing residential projects and also offer innovative payment plans, all this to attract more eyeballs from the end user community in a big way.