Building on benefits

Today, apart from the realtors who are under pressure to woo customers, there are buyers who are forcing developers to offer sops. About 800 people, who had booked flats in DLF's Garden City project in Chennai last year, formed an activist forum on Google Groups in February this year. The objective: to collectively negotiate with the builder on issues such as refund of deposits and scrutiny of the original title deed. Finally, DLF refunded the deposits of 200 buyers who had decided to exit the project. It also offered a discount to those who stayed on. Similarly, in Gurgaon, another set of 500 buyers on Yahoo! Groups managed discounts from the same builder.

The combined impact of consumer activism and sectoral pressures is that a prospective buyer has an upper hand while negotiating for a property. "Overall, real estate prices have corrected by 25-40% over the past six months. With funds drying up from investors, speculators, private equity players and banks, realtors have realised that money is only available with the end-users who, in turn, are looking at value for their money," explains Anuj Puri, MD, Jones Lang LaSalle Meghraj.

The best deals are available in the case of new or semi-constructed projects. DLF, for instance, has cut prices by 30% for its upcoming project in Chennai. In central Delhi, the same builder has launched a scheme to sell each of the 1,400 flats (1,200 sq ft each) at Rs 54 lakh, half the price of similar properties in the same location.

Does this imply that prices might fall further in the near future? Most customers believe so, but the builders don't agree. "So far, the lack of demand has forced real estate companies to announce price cuts. I don't think there is any further scope for this," feels Rohtas Goel, CMD, Omaxe. Adds Puri: "In Gurgaon, property rates have dropped from Rs 6,500-7,000 per sq ft to Rs 3,250. The prices have now hit the 2005-year range and there is no possibilty for more reduction."

At the moment, however, the deal fever is reaching a peak. This is especially for those who have already booked flats in new schemes or are ready to take possession. Some firms are now giving indirect discounts of nearly 20%; one of them has announced a 5% cut on base price, an additional 10% rebate for timely payments, and a doubling of the compensation rate (from Rs 5 to Rs 10 per sq ft per month) if the project is delayed because of problems associated with the builder. "We have implemented price corrections on project basis. Different models were worked out in different cities," says Rajiv Talwar, executive director, DLF.

Similarly, the buyers who pay timely instalments to Omaxe are being offered 5-10% discount on future payments. Mont Vert is allowing existing tenants to buy the flat once the lease expires. The rent that has been paid over the past 11 months is considered to be the down payment and is deducted from the sale price. Unitech, Ansal Properties and Parsvnath, among others, require customers to pay only the initial booking amount during the development stages and the EMIs from the date of possession. In the interim period, the developers pay the EMIs.

Freebies have become the norm, rather than an exception. A smaller house free with a bigger one. A fully furnished house for the price of a bare one. A free car (Mercedes or BMW) along with the purchase of a villa. Free international holidays. The list goes on. What you get depends largely on your negotiation skills and level of patience. The desperation among realtors is so extreme that they would rather strike a deal now, at whatever price, than wait till day after tomorrow.

However, the caveat 'buyers' beware' still applies. This is because there are many realtors who insist on fooling the prospective purchaser. The 'zero EMI till possession' offer only implies that you will not pay the interest for that period. Once your EMIs start, they will be calculated on the original amount that you borrowed and you will have to repay the entire principal amount. Thus, what you save is only the interest for a few months, which may end up being lower than a straight discount of 10-20% from the builder.

Check out the free house that is being given along with a larger one. In some cases, the latter may be priced higher than the market rate. So, the freebie offered might come to a naught. In other cases, the free one-room-kitchen flat with a 2-BHK, or a 1-BHK with a 2.5/3-BHK flat offer may be misleading. While your main house may be located within the city, the free flat may be far away in the suburbs or in another city. When it comes to cars, the models that are being doled out have, or are going to be, phased out. So, you could end up being saddled with a white elephant that you can't use or re-sell.

It is important, therefore, to scrutinise the offers carefully before you home in on them.

via Money Today