Last week, leading city-based real estate developers gathered at Mumbai’s Grand Hyatt Hotel for an hour-long meeting. The main agenda was to discuss strategies to counter the ongoing slump in home sales that has persisted for almost a year.
The primary outcome of the meeting was a realization that Indian developers have limited options for attracting buyers. The builders unanimously agreed to allow customers a greater say in price negotiations, effectively deciding to cut home prices.
They decided to offer a 10-12% reduction for all consumers, disguised through schemes such as bearing 2-3% of the interest cost, flexible rates for parking, and floor rise pricing. 'Don’t be rigid on rates; allow the customer to have his say,' summarized one participant involved in large housing projects in suburban Mumbai, describing the meeting's conclusion.
The developers’ move is significant because a sharp correction in Mumbai home prices could have a ripple effect across the country. While residential prices have dropped 20-25% nationwide, Mumbai developers have been unwilling to cut prices, citing a substantial demand-supply mismatch.
'This quarter was crucial for us,' said a developer present at the meeting. 'Demand is still robust in residential markets. We want to convert this demand into actual deals. If pricing is hampering sales, we are willing to compromise on that,' he added.
Previously, developers had been unwilling to accept that demand would weaken at high prices. However, they now realize that demand at prices seen two years back is unlikely to return. 'We believe demand can only come back if prices correct,' said an analyst with Kotak Securities.
Some developers who attended the Grand Hyatt meeting included Akruti City, Nirmal Lifestyles, Kanakia Builders, Evershine Builders, Rahejas, and RNA.
In Delhi, several developers in the National Capital Region have started offering deeper cash discounts and increased marketing efforts. They are relying on more 'genuinely-priced' products, good cash discounts, and additional advertising to attract buyers. 'We didn’t offer any discount during the festive season last year,' said Raheja Developers chairman Navin Raheja. 'But this time, everyone is giving it, since market conditions have changed.'
Raheja Developers is offering an outright discount of Rs 200 per square foot or around 6-7% at its soon-to-be-launched high-end project in sector 109 in Gurgaon. Additionally, they are offering an extra discount of Rs 100/sq ft to government employees who are beneficiaries of the Sixth Pay Commission recommendations.
This quarter, developers are grappling with falling sales, dropping rentals, and tight liquidity conditions. They have also reached out to industry associations to help restore investor and buyer confidence in the real estate sector. The overall quantum of sales dropped over 60% in the past quarter due to rising interest rates and additional pressure on household budgets.
Developers nationwide are now hoping for the upcoming festive season, offering to pay stamp duty and gifts like a car or free home furnishing. For example, Mumbai-based Sunil Mantri Realty has waived stamp duty (5% of property value) for buyers at its Mantri Park project in Goregaon (East) in Mumbai and is also offering 5% discounts at its Bangalore and Gwalior projects.
The Citigroup-backed Golden Gate Properties has offered a car for every customer booking a flat at the Golden Palms project on Hennur-Banaswadi road, about 30 minutes from Bangalore’s new international airport. 'We are offering a Skoda Fabia to every customer who books a flat at the Palms,' said Sanjay Raj, executive director at Golden Gate Properties. 'For those who already own a car, we are providing a discount equivalent to the value of the car,' he added. Golden Palms comprises 450 apartments measuring 1,400-1,800 sq ft and is priced at Rs 2,600 per square foot.