Experts suggest that there has been a recent downturn in primary sales within the Mumbai real estate sector. This situation has been exacerbated by an oversupply of inventory due to the escalation in project launches over the past two years, compelling developers to promote sales through various initiatives.
Reintroduction of 'Buy Now, Pay Later' Schemes
An increasing number of developers in the Mumbai real estate market and its surrounding regions are reintroducing 'buy now, pay later' schemes. These schemes enable buyers to pay only 10 or 20 percent of the total price initially, with the remaining amount due upon possession. These programs, initially popular during the 2015-2019 real estate downturn, aim to bolster buyer confidence.
Decrease in Primary Market Sales
The Mumbai real estate market has witnessed a surge in project launches and a rise in residential property sales over the past four years. This growth is attributed to the Maharashtra government's January 2021 announcement, which waived half of the permission fees developers had to pay. Over the last six months, several developers have implemented flexible payment options or subsidy programs.
Experts believe this trend is a result of a decline in primary market real estate sales. Due to excess inventory from the increased number of launches over the previous two years, developers have had to offer such schemes to stimulate sales.
Flexi-Payment Options Launched by Developers
Developers including Wadhwa, Runwal, Ambit, Raymond Realtors, Microtech Developers (Lodha), Keystone Realtors (Rustomjee Group), and Wadhwa have recently introduced flexible payment schemes.
- Lodha: Offers a 25% upfront payment option and 75% payment upon receipt of the Occupation Certificate (OC) for its Thane project.
- Raymond Group: Provides a 20% upfront payment option with no additional payments until January 2025 in Thane.
- Rustomjee Group: Offered flexible payment options for several projects in November 2023, timed with Diwali.
Expert Insights
According to Rajendra Sharma, Chairman and MD of Ambit Realtors and Developers, reintroducing the 20:80 subvention scheme is a strategic move to attract buyers and accelerate inventory offtake, which will enhance cash flow and reduce carrying costs.
Navin Makhija, managing director of the Wadhwa Group, confirmed that the group is offering subvention in projects where the OC is due in three to six months.
Real estate experts also attribute the revival of developer subsidy schemes in the Mumbai market to increased competition. Ritesh Mehta, Senior Director and Head of West & North, Residential Services & Developer Initiatives at JLL India, stated, 'Developers are compelled to offer incentives to differentiate themselves and sustain sales momentum due to a high volume of launches. The flexibility of staggered payments aligns with developers’ robust cash flows post-Covid-19.'
Pressure to Generate Cash Flows
Listed companies must comply with investor requests to release their pre-sales figures every quarter. To generate cash flows, developers either rely on banks or devise innovative ways to sell their properties at discounted prices. First-time homebuyer promises can be leveraged by developers to secure bank loans, according to Ravi Kewalramani, Director of RK Mumbai Realtors.
Increase in Unit Launches
According to the Maharashtra Real Estate Regulatory Authority (MahaRERA), the number of units launched within Mumbai city limits increased from 25,404 in 2020 to 52,771 in 2023.