Country's debt-laden property developers
are turning to deep discounts, free parking spots and even gimmicks like gifts of gold coins and motorbikes as they struggle to sell billions of dollars worth of as-yet unfinished homes.
Now outstripping China as the world's fastest-growing major economy according to official data, India has a real estate market mired in debt piled up in a 2006-2007 construction boom that gave way to slowdown.
It now takes developers about 4-1/2 years to turn property inventory into cash, more than a full year longer than it takes developers in China, according to Thomson Reuters Starmine data.
It's not just bad news for developers in megacities like Mumbai, now seeking ways to offload inventory with increasing intensity. It's also making it harder for many debt-burdened lenders to pass on interest rate cuts to borrowers, hindering central bank efforts to accelerate growth: RBI has cut rates twice this year, with more cuts expected.
"It is a buyer's market," said Preeti Patil, a 28-year-old who works for a media group and was in the market for a two-bedroom house in the suburbs of Mumbai. "Last week, we turned down a deal, two days later we had the builder call us to offer Rs 500 per square foot discount."
Even worse for developers, Patil is among those who have little confidence property prices will rise in future. Despite cut-price offers, she abandoned plans to buy, saying she feared the investment would not reap near-term returns.
Offers of coins of gold - prized in country's culture - motorbikes and even Apple Inc iPhones have begun to feature in developers' advertising in recent weeks, prospective buyers say. While it's too early to say whether tactics like this will be enough to reel in upwardly mobile professionals and newly wealthy middle classes, demand for scores of empty, or under-construction, high-end residences remains flat.
DECADE OF BACKLOG?
At brokerage Kotak Securities
, analysts estimate unsold inventory held by a group of leading Mumbai developers alone now stands at some Rs 53,400 crore ($8.5 billion) - with an additional Rs 36,800 crore of project launches in the pipeline.
That puts the current, unsold area in Mumbai at almost the value of the total sold in the 2014 calendar year. The backlog, analysts estimate, could take more than a decade to clear.
"The overall market has slowed down in the last two years... overall demand has gone down," said Niranjan Hiranandani, managing director of privately held developer Hiranandani Constructions
Hirandani's own 500-acre residential project in Navi Mumbai, a new suburb east of the city, is gearing up for construction after being stalled for more than two years and does not have a completion date. Hiranandani declined to provide figures for his company's inventory, but said he was comfortable with its position.