Will the festive season bring cheer to the real estate market?

September heralds the start of festive season. It is the time of the year when people want to make new investments and purchases. To cash in on the sentiment, property developers come up with discounts and schemes to attract buyers, offering freebies such as gold coins, car, holiday trip and modular kitchen. However, this year, with sales slowing, developers are under a lot of pressure to clear inventory. To encourage people to buy, they have been coming out with various schemes and even negotiating prices with potential buyers.

Not just developers. Banks and other lenders, too, try to cash in on the festival fervour by giving loans on easy terms. For example, with HDFC Bank recently slashed its base rate by 35 basis points (bps) to 9.35 per cent and other banks likely to follow suit, loans could become cheaper. All this could result in higher sales, usually 20-25 per cent more than the rest of the year, during the season. The last couple of years have been dull for the real estate sector due to excess supply, indefinite delays in projects and regulatory hurdles. Prices, too, have been stagnant. That is why despite the plethora of offers, potential buyers are wondering if it is the right time to buy a house.

Saacketh Chawla, Deputy Managing Director, Colliers International India, says: "Generally, the festival season is a good time for real estate players. This year we have already started witnessing some traction in the market." He says in Mumbai, some major players such as Oberoi, Tata, Piramal and Peninsula have come up with major launches for the pre-shraddh period. In 2015, shraddh dates are from September 28 to October 12. Let's look at some of the schemes being launched. Also, does it make sense to buy now or wait for a price correction, which may or may not happen?

PART-PAYMENT SCHEMES

There are many schemes such as 20:80, 10:80:10 or 8:92 that allow you to buy the property by making part payments. Some developers have also launched subvention schemes. How subvention scheme works Suppose you book a house under the 10:80:10 subvention scheme. Under this, you have to pay 10 per cent money upfront to the developer. The rest is paid by the bank in the form of loan to the buyer. The bank releases the loan to the developer as construction progresses. The developer pays EMIs till possession or for a period mentioned in the agreement. The scheme works well for those who stay on rent. This way, they don't have to bear the burden of both EMIs and rent while their house is being built.

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