Property discounts offered by developers in India to boost real estate market

Developers in India are starting to offer discounts in a bid to boost a slowing property market.

Falling sales over the last 18 months have prompted them to start offering incentives to property investors, especially at the luxury end of the market.

The busy home buying season normally starts in October and goes on to March. This season developers say they will be offering price cuts of between 5 and 15%.

Developers DLF, Puravankara, Unitech and Omaxe confirmed they are considering making offers and also moving into more middle priced properties.

Indiareit is planning to cut prices by 15% in a villa project in Bangalore. Mumbai-based Ajmera Group confirmed it is considering cash discounts, but only for a limited period. 'We have the option of waiving off stamp duty, tie-up with a bank or give direct cash discounts,' said Rajnikant Ajmera, managing director, Ajmera group, and president of the Confederation of Real Estate Developers Associations of India.

The Indian government is also looking at measures to boost the property industry. In Mumbai the state government has decided to increase the floor space index (FSI) from two to four, effectively allowing developers to build twice as much on the same piece of land.

But the best deals might not be obvious, especially for new projects, warns Ramani Sastri, the former president of Credai. He points out that cash discounts might not be advertised as the developer will hope to get early buyers willing to pay full price. He advises negotiating for a bargain.

But it is a buyers market. Since last year many potential home buyers have deferred their decision due to unrealistic prices and rising home loan rates. So developers are open to negotiation.

According to Pranay Vakil, chairman of Knight Frank in India, it might not be a great season for developers as prices are likely to keep falling. If the consumer's response remains weak, there could be correction up to 40% in over-heated markets such as Noida and Jaipur, which are already down 15 to 20%, he said. 'In cities such as, Mumbai a 10 to 15% correction has already happened. It may rise to 25% per cent by the end of the year,' he added.