Home prices to cut by 25% this Diwali

There is good news for people who still have plans to buy home that most realtors are advertising cash discounts of 5-10 per cent on upfront payment and buyers can get up to 25 per cent discount if they book properties and can wait for two to three years until possession. Consultants are of view that developers might even give 15-20 per cent discount on the price as they are eager to clear inventories.

Generally, the October-December is the period when the sale accounts to around 60 per cent. But this year the developers are under tension due to sharp decline in property sales. Since the beginning of the year, home sales have halved due to high interest rates and a sharp rise in the monthly loan payouts of borrowers.

Recently a national poll was conducted among top property brokers by Mumbai-based brokerage Edelweiss Securities, in which nearly 90 per cent said they have seen a drop in transactions in the last one month and almost 80 per cent have witnessed a reduction in enquiries during the same period.

Oberoi Constructions had planned to launch a 300-apartment complex called Oberoi Island in the Goregaon suburb of Mumbai during Diwali. The realtor was considering offering apartments under construction, which were expected to be completed in two years, at Rs 9,000 per sq ft from the current price of Rs 12,000 per sq ft.

Some of the developers such as Mumbai-based Sunil Mantri Realty are more honest about the price cuts, as there company has already advertised a 6 per cent discount for its 206-apartment complex Mantri Royale in Bangalore, was launched last Thursday. The company will be selling flats at Rs 2,590 per sq ft, instead of the normal Rs 2,750 a sq ft, for the next 15 days and is planning to extend it further, depending on the buyers’ response.

Mantri Realty is also planning to give similar offers at its upcoming projects at Gwalior in Madhya Pradesh and Solapur in Maharashtra, slated for launch in the second and fourth week of October respectively.

“It makes much more sense to give discounts and waive off stamp duty to persuade customers to buy apartments when the market is facing a slowdown. Every buyer demands a little more for his money and we are doing that,” said Sunil Mantri, promoter of Sunil Mantri Realty.

In view of sharp decline in property sales, the Maharashtra Chamber of Housing and Industry (MCHI), a trade body of realtors, has already directed its members to bear the stamp duty charges and pay a part of the interest cost on loans in order to improve the declining sales.

In the National Capital Region (NCR) of Delhi too, where price alteration was deeper than Mumbai, developers are giving out discounts to attract customers. Delhi-based Pearls Infrastructure is also giving 6 per cent discount on down payments in its Nirmal Chaaya Tower at Zirakpur and has announced 8 per cent discount in the Pearl City project at Mohali in Punjab.

However big developers such as DLF, Ansal API, Parsvnath Developers and Raheja Developers have not yet advertised discounts, they are launching their new projects, for the mid-income segment during Diwali to attract buyers in the mid-income segment.

"We want to launch our projects during Diwali because properties launched at this time get better response. At a time when sales are down, Diwali comes as a major sentiment booster for developers as well as customers," said Dimple Bhardwaj, spokesperson, Raheja Developers, which is launching a 412-apartment project at Gurgaon.

Whereas some realtors and consultants are of view that the discounts and offers will not help improve property sales since home loan rates are high and property prices are out of reach of ordinary buyers.

“This Diwali will not be like that of previous years. The current market sentiment is down and the developers are feeling the heat. I do not think that the discount offer of Rs 1-2 lakh will make a customer buy an apartment that costs more than his pocket,” said Anshuman Magazine, managing director, property consultancy CB Richard Ellis.

Akshaya Kumar, MD of Park Lane Property Advisors, added, "This Diwali will be a damp squib for the property market. Only in 2010, developers can do some good business. Developers may offer 5-10 per cent discount this time depending on their strength,'' Kumar says.

Prakash Gurbaxani, founder and chief executive of Bangalore-based QVC Realty, points out competitive pricing is the key to sell property than discounts. QVC is launching its 100-villa project QVC Hills, with each villa costing Rs 2-4 crore, in Bangalore during Diwali. "Nobody will wait for a Rs 5 lakh discount to buy a Rs 2 crore house. You have to price the property right and product should be good,'' he said.