Realty check: Major developers too picking up buyers’ interest tab
Developers have been facing the pressure of the slowdown, resulting in high debt and low profitability
Jun 25, 2013
Source : The Hindu Business Line

The so called 20:80 scheme that smaller players used to hook buyers is now the marketing mantra of big players such as DLF, Parsvnath and IndiaBulls.

Also called the subvention scheme, it helps the realtor clear inventory and the buyer the time to mobilise funds as he need not pay the EMI for a set period or until getting possession of the property. The catch is that the developer picks the interest tab.

Developers have been facing the pressure of the slowdown, resulting in high debt and low profitability. Most new launches of the listed entities fall in the Rs 45 lakh to Rs 1 crore or mid-tier range.

The scheme, a brainchild of smaller real estate players, has caught on elsewhere in the country, mainly in places Delhi-NCR and Mumbai.

RISING inventory

All this show up the anxiousness of realtors to clear the piling unsold homes especially as new launches have not stopped. The inventory is rising in the Delhi-NCR market that accounts for much of the projects under development.

According to a Knight and Frank research, 33,500 units were launched in the Delhi-NCR residential market alone during the second-half of 2012-13, up 6 per cent over the first half. The market has an estimated 1,40,000 units of unsold inventory, which is approximately 27 per cent of the units under construction.Delhi-NCR and Mumbai Metropolitan Board account for about 80 per cent of the total residential units being developed.

Pradeep Jain, Chairman, Parsvnath Group, said: “We have also launched a 25:75 House of Happiness Scheme. This scheme is applicable on our 20 projects in New Delhi, Greater Noida, Ghaziabad, Sonepat and Dharuhera. We are seeing an overwhelming response and are delighted to see a huge number of first-time buyers.”

Positive response

DLF has also received positive response to its 20:80 scheme. The company expects to garner around Rs 3,500 crore from the new projects to be launched just in Gurgaon. Ashok Tyagi, Chief Financial Officer, said during a conference call that the company expected high net realisation from the 20:80 scheme.

Margin pressure

“Listed developers are under tremendous margin pressures. This scheme gives them enough liquidity but also puts pressure to execute projects faster,” said Manish Mehta, Vice-President, Indiahomes. “For offering such schemes, the nod from the bank is a must. Banks usually look at the credit history and the reputation of the developer. Projects that listed players are offering largely fall in the Rs 50 lakh to Rs 1.5 crore category,” he added.

A banking official pointed out that the scheme had swelled the home loan portfolio despite the risks.

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