After the RBI’s new plan of loan under 20:80 ratio, many leading developers are working out new strategy to attract the buyer with any deduction in their prices. Some Realtor are giving gifts and freebies to the buyers. With economic slow down prevailing in Indian markets its like rubbing salt to the injury.
The just concluded Navartri festival has not given much movement in NCR real estate market. This i
s usually a period when the buying activity is at its top. But due to slow down the developers are giving new schemes and offer and also handing out freebies.
In a recent report, there are unsold inventories lying which will take Delhi-NCR 21 months more to clear the back log, Mumbai being the worst hit will take 48 months to absorb.
The real estate market got a jolt when RBI issued a notification and asked the banks to restrict the loans to 20:80 for under construction project. This led all the calculations upside down for the developers.
Under the scheme the RBI has tightened the rules to protect the interest of buyers and contain the result of such new housing financing schemes. If the builder defaults it will affect the credit profile of the buyer and expose banks to higher NPAs.
As the new loan scheme prevails, a pact will be signed between the bank, the builder and the buyer who would pay 20 pc of the total cost while booking. The bank will pay the remaining 80 pc to the developer on buyer’s behalf. The problem lies with the developer has he was using the credit line of the buyer to get home loan at a cheaper rate of 10-12 pc which is usually given at 16-18 pc.
This type of plan 90/10 was introduced in 2009-10, by some developers but was banned afterwards.
Over a period of time several developers diverted funds and deferred the project for which loans were taken. The buyer was forced by the bank to repay after a particular period without even getting possession according to the agreement. Then buyer’s resisted legal issue cropped up making properties non-performing assets.
There are big players in the market with good capacities who exploited the banks and the buyers and made profit. This lot of builders would be more affected if the supply of cheap funds halts.
Given the slowdown they are facing, developer would avoid payment schemes and would bank on the freebies to attract the customer. Some are even gifting gold coins with each booking, some are even paying stamp duty and waving off some charges. After that they have to provide furniture, fridge,sofa sets, LCD Televisions etc.