Property with Freebies in BangaloreUnmasking property discounts and the free gifts
 
It is a true that some developers are unable to sell houses and are offering discounts to lure purchasers in Bangalore. But, recent buyers have also discovered that many of these discounts are only marketing gimmicks.
 
There is no actual reduction on the real value of the flat. These discounts are often offset by other expenses that the buyer is forced to incur when taking possession of the flat.
 
Take the example of Chetan Somani, who has been hunting for a house in Mumbai suburb of Kandivali. In his first experience, he sat to negotiate with the developer. After deliberations, the developer offered a flat on the first floor and a discount of Rs 500 on the quoted rate of Rs 6,500.
 
When they were about to sign the deal, the sales team said that he will need to compulsorily buy stilt parking for Rs 4 lakh. Else, the discount will be waived off.
 
Another developer gave him Rs 700 discount, but when the cheque was about to be signed, the developer insisted on an additional Rs 600 per square feet as a transfer fee because the house was in someone else's name.
 
In Thane, a developer was apparently offering a car with each sale. The promotions also claimed home loan interest rates at 8 per cent through two cooperative bank. The customers later found that the car was a bumper prize. Worse, the 8 per cent interest rate was only for the first few months.
 
Orange Properties, Bangalore-based firm that markets other developers’ projects, offered customers an Audi free with each villa. The starting price of the super luxury villas were about Rs 3.49 crore. Tying up Audi made sense for developers as the car-maker was selling the particular model at discount as it will bring new generation Audi A4 in the month of May.
 
Pankaj Renjhen, MD (Mumbai) of Jones Lang Lasalle Meghraj, said, “Developers do not offer discounts below the base cost, which includes the cost of land and construction. However, developers do offer value-additions and incentives to prospective buyers to speed up the willingness to buy. When looked at closely, these incentives do not have any significant monetary value.”
 
Raja Kaushal, chief operating officer of Atisreal Redwoods, BNP Paribas real estate advisory arm, said, “In a falling real estate market, small developers start with such practises before going for distress sale.”
 
On the combination offer, Kaushal said that all these practices are adopted from Dubai-based developers. In the Middle East, for the luxury apartments, developers tie up with the car companies or offer other such discounts. Most of the products bundled with the house are either phased out or in the process being phased out.
 
All the experts say that such offers are from smaller realtors only. The bigger ones have sufficient holding power to await the natural progression of the property cycle, said the experts.
 
For instance Housing Development and Infrastructure Limited, a well known developer from the city, gives bare essentials in their projects for mid-level segment housing.
 
Says Joseph Pattathu, Director, HDIL , “Furnishing the house increases the overall cost. Buyers anyway redo the flats before they move in. We generally offer flats at 15 per cent less than the prevailing rate in the area.” A simple rate cut, perhaps, makes more sense than goodies.
Source: Tinesh Bhasin - Business Standard, April 06, 2008, Visit www.business-standard.com

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