Deal Drought: Discounts, incentives absent as the festive season sees strong real estate sales

Discounts have been largely absent in ongoing festive season real estate sales, whiles incentives too are at a minimum

Real estate players are not giving big discounts or incentives to push sales during the ongoing festive season in most markets, except maybe the lower end of the sector. Observers say that with low levels of inventory in the affordable and the mid segment, developers are not under pressure to provide incentives, despite sales in those two categories showing stress in recent quarters.

"As things stand, there are no major incentives and discounts being offered by developers across the top seven cities. The usual freebies, including gold coins, phones, modular kitchens, etc., may be offered, but other than that no major discounts are being given. If developers do go on to offer discounts and incentives it would mostly be in the affordable and mid segments, where sales remained tepid in Q3 2024. The luxury segment has been performing well in comparison," said Santhosh Kumar, Vice-Chairman of the property consultancy firm Anarock group.

During the festive season in previous years, especially prior to and during Covid, developers often offered upfront discounts to the listed price of the home being sold, typically around 5-6 percent, and some also offered to make good the statutory payments required for property purchases, such as the stamp duty and registration charges, and later, the goods and services tax (GST). Some developers even offered cars, furniture, and home appliances along with the home being sold, with the make and quality depending on the price of the property.

Observers, however, say that currently the incentives generally extend to streamlined payment plans, as home sales have been largely strong despite signs of weakness in recent quarters.

"The incentives that we are seeing in the market are generally in the form of payment plans, in which developers link the payments to progress in construction, or they charge some of the price upfront and provide a payment holiday for a period of time. Developers feel that since home sales are strong, they do not need to provide discounts to drive business. It is important for developers to sell the inventory quickly, as the holding cost of real estate is high, in terms of deploying sales teams and related expenses," said Gundeep Singh, Co-Founder and Chief Executive Officer of property technology firm Simplease.

At the NAREDCO Homethon 2024 property exhibition that concluded on Sunday in Mumbai, developers, many of whom were showcasing their premium and luxury offerings, did not show much appetite for providing discounts or major incentives. While some developers did showcase their mid segment projects, they said that with declining margins, major discounts to push sales are not viable.

"We are trying to show customers the amenities and the value of investing in real estate. Right now, margins in the mid and affordable residential real estate segment are low, and providing discounts to customers will affect the viability of our projects. Despite some slowdown in the segment, we are still getting enquiries for our projects," said a developer at the exhibition.

In the July-September quarter, sales in the mid segment across the top markets in India declined 13 percent on a year-on-year (YoY) basis, while sales in the affordable segment (priced less than Rs 50 lakh) slid  14 percent in the same period, according to research by property consulting firm Knight Frank. Conversely, major real estate players such as Macrotech Developers and Godrej Properties, which have shifted stance to primarily operate in the premium and luxury segment, reported a bumper quarter in terms of pre-sales.

Godrej Properties reported  bookings worth Rs 5,200 crore in the July-September quarter, growing  3 percent YoY in what is considered a weak season for real estate sales. Macrotech Developers, aka Lodha, reported pre-sales of Rs 4,290 crore, up  21 percent over the same period last year, while its collections jumped 11 percent YoY to around Rs 3,070 crore.