Pin It

The Trend of Cutting Prices in Real Estate Business


The realty market of India has gone through a dynamic change in the past few years. The early years of the realty sector in the country were dominated by industrial establishments. When one thinks of the yesteryears’ Gurgaon which is stuffed with numerous residential establishments but the highlight of the city became the DLF buildings which dotted the town all the way from Shankar Chowk to Iffco Chowk. Those were the days when the demand of land increased by leaps and bounds and the prices soared. Farmers became millionaires.

The years to follow saw extensive growth of the city and the price of accommodations and office spaces defied logic. The high demand and lack of a structured framework within the sector ensured that the process remained the same and the prices remained sky high.

This was the case not only with Gurgaon but also all the other emerging territories across India.

Then came the slowdown of the 2011-13. Due to numerous reasons, the ever glorious realty sector across the country suffered. Suddenly there was a pileup of inventory which remained on the market but found no buyers. Many builders shut shop and closed down their projects. Others suffered losses for having had inventory piled up for too long. It was only after the formation of the new government at the centre that the markets showed signs of improvement.

But till date, industry experts deny a revival. The festive season in October/ November a few years back was marked by high sales. However, this year the sales remained sluggish and below expectations, shattering all expectations of the revival. However this does not change the fact that market revival is in the offing.

Interesting Shift in Marketing Tactics

 

After the slowdown of 2012-13, the builders in the real estate markets started offering special schemes to sell away their properties. Whether it was property in Pune or flats in the newly developed areas of Hyderabad, suddenly there was a flurry of activity and accommodations started being sold with additional services. It is true that the true value of those services was negligible if calculated, but the overall scheme was to lure in buyers, something that was earlier not much of an issue.

Builders also established corporate like structures complete with consumer help desk and agents visiting prospective buyers; the kind of marketing that was aggressive and never seen before. Interestingly, the ROI on the establishment of a helpdesk and agents’ travel expenses must have been good otherwise the model would not have been in place.

The Latest Trend of Price Reductions

This year, a builder in Chennai reduced the price of his project by almost 16% and marked his property prices below the market average.

This trend is catching on across the country. Some sellers are giving a lesser price quote when one goes to buy resale flats in Pune.

This particular tactic is reminiscent of the airfare price wars which have made the aviation an unexpectedly volatile industry. But it is certain that the same results will not be witnessed in the realty sector. It is true that the builders do have high profit margins, however they cannot drastically reduce prices. They did not reduce the price even during the slowdown period when the demand diminished.

In conclusion

In the improving markets, the concept of price cuts in realty comes as a surprise. If the trend catches on, then the realty sector would witness an interesting shift in the times to come.

Leave a reply