To draw home buyers, developers sweeten deal with freebies, discounts

With home sales slowing down in Kolkata, developers across the city have taken to marketing by offering a host of freebies, première facilities and discounts. While discounts may not be openly advertised, sources say some deals are closed 10-15 per cent lower than marked price on down payment.

The average selling price in Kolkata has seen a 5-10 per cent drop between July and December 2018, depending on location, as compared to the same period last year. This incidentally is the highest drop in the last three years.

In some micro-markets, like on the northern fringes, where there is an over supply, the price drop has been steeper – to the tune of 7-10 per cent. The average selling price in H2 of 2018 stood anywhere between ₹3,300 – 4,400 per sq ft, sources said.

Bookings of under-construction projects continue to be affected while small developers are the worst hit. Deep pocketed ones have managed to hold on to prices and stocks.

“Despite developers’ focus on product differentiation, widespread marketing and discounts, residential sales volumes remained at an all-time low in 2018. The primary reason behind low sales is the end-user expectation of price rationalisation in the quarters to come,” real estate consultancy firm, Knight Frank said, in a recent report.

It adds: “Developers are shying away from publicising upfront discounts on base selling prices.... though on a case-by-case basis property deals with customers are being closed with 10-15 per cent discount on overall ticket prices on upfront down payment.”

Approximately 12,731 units were sold last year (calendar year 2018), a 10 per cent dip over the 14,147 units sold in the year-ago-period. On the other hand, average price per square feet saw a four per cent decline to ₹3,259 per square feet in 2018 (as against ₹3,395 in 2017).

New launches in 2018 witnessed a 25 per cent decline during the year.

Regulatory Framework

Implementation of the State real estate regulatory framework – WBHIRA – and subsequent registration of projects is said to be a reason for slowdown in new launches.

Moreover, GST on under-construction buildings has further dampened sales, developers said.

Along with the stamp duty and the registration fee of 7 – 8 per cent, and, a 12 per cent GST, the total tax goes above 19 per cent for an under-construction project. Before the GST was launched, a service tax of approximately 5 per cent was levied and a 5 per cent VAT by some State governments in addition to the stamp duty and registration fee.

In fact, unsold inventory is taking longer time to be disposed.

While previously units were sold over 12.1 quarters (approximately three years); they are now taking 12.6 quarters (or three years three months) to dispose.

‘Nothing to worry’

Developers on the other hand have pointed out that there is nothing much to worry. According to Harsh Patodia, Chairman cum Managing Director of Unimark Group – one of the companies executing the Trump Towers project in the city – mandatory registration of projects under WBHIRA have led to a temporary slowdown in launches. This apart, the preference is for ready projects.

“A slowdown in launches because of the new regulatory framework is quite common. It has been the case across all cities,” he said.

“The trends are changing towards ready-to-move-in projects. Obviously the market will take some time to react,” Patodia pointed out.

COMMENT NOW