Covid-19 outbreak: Real estate majors rule out price cuts after lockdown

Despite fall in sales, supply constraints may keep prices firm

Though the nationwide lockdown is taking a huge toll on the real estate sector, property developers are in no mood to cut prices. This despite the fact that the March quarter of CY 2020 witnessed a 30 per cent decline in the sale of residential units and there will likely be a similar fall in sales this calendar year.
 

“We don’t have any plans to cut prices. The industry has been reeling from a slowdown for the last eight years. There is limited scope to cut any prices,” said Mohit Malhotra, managing director at Godrej Properties, the real estate company of the Godrej Group.
 

Malhotra said barring a few places such as south Mumbai, not many areas  had a significant stock of ready properties. Hence, developers are not under pressure to cut prices.
 

Vikas Oberoi, chairman and managing director of Oberoi Realty, echoed the same view. “There will be a huge supply constraint because of the financial stress most developers are going through. This in turn will continue to maintain prices or may even push up the price of ready flats,” Oberoi said.
 

Developers in the affordable housing segment have also ruled out any price cuts going forward.

Pradeep Aggarwal, chairman of  Signature Global, which builds affordable housing projects, said: “Unlike the luxury segment, price cuts are not an option in affordable housing, since we anyway operate at 5-7 per cent margins. But if the government heeds our demand and brings down GST (goods and services tax) on raw materials to a single digit figure, then we can bring down prices.”
 

Margins in middle-income housing have dropped from 30-40 per cent earlier to sub 20 per cent levels, experts said.
 

Rajesh Brahmbhatt, chairman of B Safal Group, a Gujarat-based developer, added, “We don’t believe price cut is a solution. There has been pressure on sales for the last three years and prices have hit rock bottom. There is no room for further correction.”  The group has seen a 60 per cent fall in sales in the March quarter.
 

However, HDFC Chairman Deepak Parekh recently said that realtors should be prepared for up to a 20 per cent fall in prices and that they would have to create liquidity by selling their inventory at whatever prices they got.
 

“The next six months are going to be extremely tough. You need liquidity. Get the cash flows coming by selling properties at whatever prices you get. Don’t sit on completed properties,” Parekh had said in a video call, attended by about 6000 developers. He said it was an excellent buying opportunity for potential homebuyers with job security and savings.

Niranjan Hiranandani, managing director at Hiranandani group, said how each developer approached the post-lockdown scenario would differ across companies, projects, segments, and micro-markets.
 

“Any price correction or sweeteners for customers will depend upon the economic scenario, how it impacts buyer sentiment, and how the real estate market responds,” Hiranandani said.

He said his company was generating sales although at a slower pace than what it was prior to the lockdown. “Once ‘normalcy’ returns, a review of the scenario will be done, a holistic perspective will be taken while taking stock of on-going projects as also market sentiment, and then the sales plan will be worked out,” Hiranandani said.

Freebies and goodies
 

Some developers, such as the Bengaluru-based Puravankara, are banking on marketing campaigns to generate sales. Earlier, it has a few coupon-based campaigns with offers running on its ‘BookMyHome’ platform. Currently, the company is running two campaigns — ‘Mega Lockdown Online Deals’ and ‘Akshaya Tritiya’ —  for those who want to book their home online, revealed managing director Ashish R Puravankara.

Others are also offering incentives to push sales. Bhasker Jain, head – sales, marketing and CRM, at the Mumbai-based The Wadhwa Group, said that the company is giving buyers the option of immediately moving into its ready properties, which they can pay for over a period of 12-18 months.
 

Another developer, the Runwal Group, is giving its buyers a price assurance at all its projects to protect them from the possibility of a price drop in the near future.