With the festive season around the corner, marketing departments in all companies cerebrate to be the next Claude Hopkins (known for his idea in promoting a leading brand) to sell their product or service. The million dollar question is… are these deals for real or just a marketing gimmick that developers use to earn easy money to increase their cash flow?
As reported in Money today, Mr Arora invested in real estate after being impressed by a real estate company’s advertisements. However when he visited the site after a year, there was no sign of the project. What should have been an easy transition as promised in the advertisements, finally turned out to be legal battle for years after which the court ordered the company to be liquidated. It is important to remember that as with everything else in life… it pays to read the fine print as you only get what you pay for…
Most developers try to cash in by advertising an avalanche of special offers since the buyer’s purchasing propensity during festivals is very high. According to a recent survey conducted by a leading online realestate portal, 61% of homebuyers prefer investing in property during the festive season.
Few reasons why developers are keen on discounts to increase sales:
- Inventory not getting sold: The huge pile up of unsold inventory left vacant since developers are keen on launching projects where they have invested huge sums, and it is crucial for them to get return on their investments.
- Lack of funds: Developers with good track records over long tenures tend to get loans in comparison with the new developers. Therefore they experience a cashflow crunch which will only be compensated via quick sales.
- Loss for the Developer: Developers are often willing to sell at a discount when the property costs them more in interest to hold on to and wait for a higher price. They often prefer to move it quickly and sell it to clients.
- Longer gestation period: Buyers are unwilling to invest in properties where there is a longer gestation period. They prefer properties which are scheduled to be completed in the next one-two years. Hence developers offer attractive discounts on properties with longer gestation periods.
- Rise in affordable housing sales: With affordable housing segment becoming a common interest area amongst the buyer’s fraternity, developers who have invested in luxury projects find it inevitable to offer discounts.
Tips to detect “Foul Play”:
- Invest in the developer and not the deal: Be careful and conduct a due diligence on the developer. This festive season will be the perfect opportunity for developers to lure customers to purchase prelaunch properties. Hence it is important to assess the developer’s financial position and their credibility in the market.
- Start asking the right questions: During the site visits, you often get to meet the sales and marketing professionals, instead of being trapped by their charismatic attitude, start your conversation by asking smart questions like quality of infrastructure, connectivity to the main road, government approval on projects, timely completion of projects, information on completed projects, waste management system etc…
- Use Social networking channels: The silver lining in an otherwise discount oriented market is to join real estate forums to research if the concessions offered are genuine, based on the current market rates for similar projects in the same locality. It can be possible that the developer has exaggerated the listed price for the project and then offered healthy discounts.
- Be a smart buyer: Buyers should base their purchase decisions on the intrinsic value of the property rather than on the give-aways. They should make a conscious decision by researching on all the developments in the vicinity of the project. Increase in developments around the project is directly proportional to a higher price appreciation of your property in future.
- The Silver lining: There are real estate companies which are reputed and well established, you can always rely on them to grab a great deal. With multiple lucrative options high returns are always guaranteed, real estate should be the primary investment option for you to look out for this festive season.
“Festivals are the best season to avail good offers, considering the amount of investment it is important that the customer completes a due diligence on the developer. Customer’s should verify the following questions:
How is the financial stability of the company(review the companies investors) , List out their completed projects, check the terms and conditions properly on the offer, relate the compatibility of the offer with their needs, and use caution while investing in projects which have not yet started” says Ajay Kumar Singh , Head of the Sales Fulfillment team from Value & Budget Housing Corporation.
To make sure that you are unscathed from the offers, this festive season … it’s necessary for you to wear the invisible deerstalker hat and go all Sherlock Holmes before investing.
Let’s remember the famous quote from the famous Shakespearean play “The Merchant of Venice”.
“All that glisters is not gold;
Often have you heard that told:
Many a man his life hath sold
But my outside to behold:
Gilded tombs do worms enfold.
Had you been as wise as bold,
Young in limbs, in judgement old
Your answer had not been in’scroll’d
Fare you well, your suit is cold. Cold, indeed, and labour lost: Then, farewell, heat and welcome, frost!”