Cash crunch, sales dip force A'bad realtors to innovate

Acute cash crunch and dwindling sales has forced developers in Ahmedabad to try innovative ways to lure buyers. From 'interest free EMIs till possession' to 'free parking, free club membership', developers are offering varied discount schemes to keep up the business.

Confirming the trend is Rajesh Brahmbhatt, promoter of renowned real estate development firm B Safal Group which keeps offering such schemes. "As developers we have had to resort to such schemes to attract buyers. The current market scenario is so down that buyers are on a wait-and-watch mode. However, we are also careful in the kinds of discount schemes being offered so that we cater to buyers' needs," said Brahmbhatt.

So while developers may not offer direct cash discounts as much as through innovative schemes like free EMI, free parking, free club membership, free maintenance, among others. Local developers in Ahmedabad have not leveraged their balance sheet to the extent their peers in other major cities have done. This had led to enough "holding capacity" for the developers to sustain themselves in trying times. However, many of them are now feeling the cash crunch.

"From 2002 to 2011-12, developers had built what we call 'holding capacity' wherein they had enough liquidity since they were not exposed to debts. However, now the liquidity shortage is showing up since it's been 6-7 long months since sales have been either dwindling or on standstill," reasoned Rajeev Shah, managing director and CEO of RBSA, a consulting and advisory firm.

Industry estimates cite a drop in real estate business in Ahmedabad at anywhere around 20-30 per cent. The dip in business comes at a time when supply is constantly being added in residential property market, wherein almost 50,000 units are expected to come up in next three years.

However, according to Hitesh Shah, CEO of Space Management, a city-based real estate consulting firm, the cash crunch is being felt more among the new entrants in the property market.

"While the old developers have been in business since multiple decades and hence have considerable land bank, the newer ones have bought land at higher prices in recent times. Add to that, buyers have been staying put for now, forcing developers to innovate in attracting the former," said Shah.