How a real-estate firm tries to buck the slump

Published: February 11, 2009

New Delhi: The slump in the Indian real-estate industry has forced one of the country’s largest real-estate developers to introduce a scheme that would have sounded incredible yesterday.

The company, which is listed in India, told The Indian Express it would pioneer a ‘price protection’ scheme soon for customers buying homes in the Rs 20 lakh-to-Rs 40 lakh category across the country. The company, with a pan-India presence and projects in cities such as Hyderabad, Kochi and Indore besides the four big metros, includes the Rs 20 lakh-to-Rs 40 lakh price tag in the affordable housing segment.

A top company executive who did not wish to be named said under the proposed scheme, if the price of a house drops within a year of a consumer entering into a contract with the developer, the latter will pass on the benefit of any reduction during the year to the consumer. “The consumer would ultimately pay only the reduced price of the property,” the executive said.

Most consumers make a down payment and commit to pay the balance in installments. So, if the price of a house drops from the initially contracted Rs 40 lakh to Rs 38 lakh during the year, the consumer’s installments will be reduced commensurately.

To ensure that only genuine consumers gain, the company will impose certain conditions. For instance, the property would not be allowed to change hands for one year to keep speculators at bay. “Speculators can otherwise enter into transactions again, resulting in an artificially higher price for the property,” the executive said.

Further, the company would sell only one home per family. This is also a way for the company to ensure that people are buying a house for possession and not for investment purposes. The company will also be assured then that the buyer does not default on his installments.

Anshuman Magazine, CMD, CB Richard Ellis India, said this would improve confidence in the market. “It comes on the back of many other developers announcing schemes such as full payment only after construction is over. Companies have even offered free cars to potential customers,” he said. Such schemes should do particularly well in Tier II cities where Magazine expects some price reductions.

Source: Indian Express

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