Realtors woo customers through buy-back schemes

Experts say through buy-back schemes, developers, cash-crunched or otherwise, are able to raise funds at much cheaper costs

Assured return schemes have returned to the real estate sector, albeit in a new form. Now, companies are promising to buy back property sold to customers, after factoring in a 30-70 per cent appreciation in value.

Earlier, in the commercial segment, realtors assured buyers of fixed rentals for particular durations. Now, assured returns are emerging as a strong marketing ploy in the residential segment, too.

Experts say through such schemes, developers, cash-crunched or otherwise, are able to raise funds at much cheaper costs.

Developers primarily operating in the National Capital Region, including ATS, Assotech and Raheja Developers, are offering such schemes to lure buyers in a slow market. Depending on the feedback of property buy-back schemes, these might find a place in other residential markets, too.

ATS has launched such a scheme for its project, ATS Tourmaline, in Dwarka Expressway, Gurgaon. Through the scheme, buyers will initially have to pay Rs 21.64 lakh, while a payment of Rs 14.43 lakh will be due in 18 months, or later. After three years from the date of booking, ATS is giving a buy-back offer of Rs 62.33 lakh, according to details provided by brokers. Buyers will, of course, have the option to take possession of flats at the end of three years.

Anshuman Magazine, chairman and managing director, CBRE South Asia, says, “When the market slows, there is innovation in marketing schemes. This being a financial scheme, it is another way of developers raising funds.”

He added borrowing from individuals involved lower interest rates and required less or no collateral (a necessity while borrowing from banks). “Developers will be able to reduce their inventory. It will also encourage buyers, as their acquisition costs will come down.”

Magazine, however, warned buyers to take informed decisions and carry out due diligence before opting for such schemes.

 

So far, the realty sector is devoid of a regulator. Experts said this made it difficult for buyers, adding whether such schemes worked would be seen only at the time of the transactions.

Late last year, Raheja Developers had announced a buy-back scheme with 30 per cent returns, after buying plots at Rs 28,500/sq yard for its project Aranya in Sohna road, Gurgaon. The scheme involves a lock-in period of 18 months and the entire basic sale price has to be paid upfront. However, if a buyer/investor wants to stay invested, the plot is allotted and, subsequently, possession is given, according to a broker.

For its project in Gurgaon, Assotech is offering returns of 30-42 per cent through 18 months, with a buy-back option.