There may still be scope for some marginal rate corrections in certain depressed markets – but as we often say in the industry, timing the market is a game only investors should play. There are no guarantees for when, where and even if corrections will occur.
Certainly, a whole country’s real estate market does not witness synchronized corrections like on the stock market, where everyone is affected simultaneously and to the same extent. For genuine homebuyers who recognize a good thing when they see it and can call it good enough, it has certainly never been a better time.
The Government has also provided several incentives for first-time homebuyers, especially in the budget homes category, and developers are rolling out year-round attractions in their keenness to close transactions. Moreover, the plentiful supply of ready-to-move-in properties also benefits homebuyers – the instincts for instant gratification and risk aversion can be satisfied simultaneously.
RERA requires developers to be completely transparent in their marketing outreach – including in terms of schemes and add-ons, which must all qualify as fair and transparent promotional activities. Outright misleading promotions are not allowed under the RERA regime and few players, if any, will resort to them now. (Even visuals in marketing collaterals and on hoardings meant to depict the project or its purported lifestyle quotient must be clearly mentioned as ‘representative’ and ‘artist’s impression’.)
Nevertheless, many buyers tend to ignore the fine print of a seemingly attractive but inherently booby-trapped payment scheme. Ignorance in the face of information availability is not a legal recourse. If a buyer did not read the fine print and ask the right questions, a developer can technically not be held accountable. He becomes legally liable if there is no fine print available at all, but not if it exists and the buyer ignored it. Here, the guidance of a property consultant can be invaluable.
White goods should only be seen as valid attractions if the property itself is of inherent value to the buyer. If an overall desirable property comes with add-ons like furnishing, modular kitchens, essential fittings and reserved parking space, there is real value. Waived stamp duty and registration charges can obviously also have positive implications on the bottom line.
However, none of these should tip the scales towards a purchase decision if the project is in the wrong location, does not have all legal documents (such as RERA registration), or there are other inherent location-specific defects such as unreliable utilities supply and lack of sufficient social infrastructure and public transport options.
A rate cut on the stated cost of a property is the clearest and most convincing incentive that a developer can give to his buyers. However, a rate cut should not divert focus from the real value of the property. Also, rate cuts are rarely announced officially but rather earned on the negotiation table. There are good reasons for this.
If some developers in a certain locality start announcing rate cuts, other developers with similar projects in the same area may have no option but to reduce their own rates to stay relevant in a competitive market. However, at the end of the day, relationships matter in the developer community and very few players will be willing to start a rate war. Therefore, announcing a hard rate cut is considered the last and least desirable option.
This does not mean that the ticket size cannot be reduced. Buyers can and should negotiate on the final asking rate, or get their property consultants to negotiate on their behalf. However, this is only an option if a developer sees serious intent – a seasoned player’s sales team can spot ‘window shoppers’ easily. Also, there is a logical limit to how far a negotiation can go.
Developers invest significant capital into land, construction and building permits and need to recover these costs with at least some profit margin. No reputable developer with a good product will sell at a loss – and just ‘breaking even’ is obviously not a desirable strategy in any business.
While even credible developers will negotiate with serious buyers to some extent, only weak players in deep financial pain (and probably wanting to exit the market altogether) will opt to sell at an outright loss. A reduction of 5-7% should be considered an acceptable knockdown on the overall ticket size. To push beyond this is inadvisable, and can be counter-productive.
