x Abu Dhabi, UAETuesday 25 July 2017

As Indian property market slows, developers entice buyers

The offerings, usually trotted out during festive seasons when major purchases occur, come ahead of this Sunday’s Diwali celebrations.

An Indian labourer at a construction site in Mumbai. Nearly a third of developers’ housing inventory is usually sold during festive sesaons. Divyakant Solanki / EPA
An Indian labourer at a construction site in Mumbai. Nearly a third of developers’ housing inventory is usually sold during festive sesaons. Divyakant Solanki / EPA

Indian property developers are using incentives including free cars, gold coins and holidays to entice prospective buyers as the market slows.

The offerings, usually trotted out during festive seasons when major purchases occur, come ahead of this Sunday’s Diwali celebrations.

Anuj Puri, the chairman and country head of Jones Lang LaSalle India, says residential markets in many cities are slow, and they “are reaching a stage where only hard discounts will achieve any significant extra momentum”.

Many developers use incentives and innovative financial schemes as their last resort, or they would have to reduce their property prices, Mr Puri says.

The practice, he says, is a time-honoured marketing tactic during festive seasons, which are considered as prime periods for residential property sales.

During festive seasons, nearly a third of developers’ housing inventory is usually sold.

India’s residential property market is under pressure amid the country’s economic slowdown, high interest rates and large inventories of unsold home in major cities.

In New Delhi, home prices in the April to June quarter fell 1.49 per cent from the previous quarter, while prices in Mumbai declined 0.45 per cent, according to data from the National Housing Bank.

Residential prices in Hyderabad fell 4.55 per cent, while home prices in Kolkata slipped 4.06 per cent.

The country’s central bank recently banned lenders from issuing loans under the “80:20 scheme”. Under the scheme, a three-way agreement between the lender, developer and homebuyer, the buyer pays 20 per cent of the property’s price upfront, while the remainder of the home loan would be issued to the developer, regardless of the stage of construction.

Analysts say the ban is further weighing on home prices, particularly in the larger cities.

To market its projects in Mumbai, the developer HDIL is offering incentives including a cash discount of 350,000 rupees (Dh21,000) and a four-day holiday in Malaysia for the first 100 bookings.

The firm is also offering buyers the opportunity to win a Mercedes-Benz.

Hariprakash Pandey, HDIL’s vice president of finance and investor relations, says it has received “good interest” from non-resident Indian buyers and investors from the Arabian Gulf.

Meanwhile, Puranik Builders is giving away holidays to Spain and Bali to buyers of its apartments in Pune and Thane.

LIC Housing Finance, a major housing finance firm, has discounted its mortgage rates by 0.25 per cent as a offer during the festive period.

ICICI, India’s largest private-sector bank, has also launched special home loan offers targeting Indian expatriates for the festive season.

Analysts say the central bank’s rate increase on Tuesday could push up mortgage rates soon.

Varun Goel, the head of portfolio management services at Karvy Private Wealth, says non-resident Indian investors could see mortgage costs rise by five to 10 basis points.

In the UAE, foreign exchange firms say they are seeing a surge in business during the festive season, as Indian expatriates remit money for purchases including gold and property.

“This year we had the weakening of the rupee, which has had a major impact of substantial growth in terms of remittances,” said Promoth Manghat, the vice president of global operations at UAE Exchange. “Seasonal spikes are always there. For Diwali, we’re looking for a growth of 5 to 8 per cent.”

business@thenational.ae