A growing number of real estate developers in Mumbai real estate market and surrounding areas are reintroducing `buy now, pay later‘ schemes, which allow buyers to pay only 10 or 20% of the price upfront, and the rest on possession. These schemes, prevalent during the real estate slowdown between 2015 and 2019, aim to boost buyer sentiment.
Softening demand?
Over the last four years, the Mumbai real estate market has witnessed increased sales of residential properties, accompanied by a surge in launches.
This growth can be attributed to the Maharashtra government's announcement in January 2021, that waived 50 percent of what developers had to pay to obtain permissions. However, in the last six months, several developers have reintroduced subvention schemes, also known as flexible payment options.
Experts say this may be because of primary market real estate sales have softened in recent months. Also, the increase in launches over the past two years has led to an oversupply of inventory, prompting developers to offer such schemes to drive sales.
Developers such as Macrotech Developers (Lodha), Keystone Realtors (Rustomjee Group), Raymond Realtors, Wadhwa, Runwal, and Ambit have introduced flexi-payment offers in the last six months.
For instance, for its Thane project, Lodha is offering an option of 25% upfront payment and 75% on receiving the occupation certificate (OC). Similarly, also in Thane, the Raymond group provides an option of paying 20% upfront, and nothing until January 2025. In November 2023, during Diwali, the Rustomjee group offered flexi-payment options at some of its projects.
From the horse's mouth
According to Rajendra Sharma, Chairman and MD at Ambit Realtors and Developers, reintroducing the 20:80 subvention scheme is a strategic move to attract homebuyers and expedite inventory offtake, thereby improving cash flow and reducing carrying costs.
Accordingly, the Wadhwa Group is offering subvention in projects where the OC is expected within three to six months, said Navin Makhija, Managing Director, Wadhwa Group.
Also read: The case of Mumbai’s disappearing balconies—and their reappearance
Real estate experts also attribute the resurgence of developer subvention schemes in the Mumbai market to heightened competition.
"With increased launches and high supply, developers are compelled to offer incentives to stand out and maintain sales momentum. The flexibility of staggered payments also aligns with developers' robust cash flows post-Covid-19," said Ritesh Mehta, Senior Director and Head, West & North, Residential Services & Developer Initiatives, JLL India, a real estate consultancy firm.
"Listed players do this because they have to show their pre-sales number every quarter to investors. For cash flows, developers either rely on banks or sell at a lower price by giving innovative offers. Commitments received from homebuyers (who make the initial payment) also act as collateral for developers, and help raise loans from the banks," said Ravi Kewalramani, Director at RK Mumbai Realtors.
More launches
According to the Maharashtra Real Estate Regulatory Authority (MahaRERA), the number of units launched in Mumbai city limits increased from 25,404 in 2020, to 52,771 in 2023.
Also read: Mumbai real estate: 27% less units launched in CY23 compared to CY22, 1 BHK ratio goes up
The surge in launches has been particularly notable in the 1-BHK category, accounting for 34% of the units launched in the second half of 2023. Additionally, in 2023, the 3.5 and 4-BHK category saw the highest launches in three years -- 1,509 -- compared to 1,402 in 2022, 979 in 2021, and 504 in 2020.
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