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Real Estate India

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Jun 5, 2008 14:23

EMI HOLIDAYS DRIVE FLAT HOUSING SALES

Posted by pratibha2020

Faced With declining demand for properties, real estate companies are courting buyers with a new offer: EMI holidays.

This trend is catching up in cities like New Delhi and Bangalore where real estate markets face stagnation. Under an EMI (equated monthly instalment) holiday scheme, the buyer only needs to make a down payment of 10-15 per cent of the flat's cost and does not need to pay EMI till he gets possession. However, the buyer has to arrange the loan and the builder will pay the interest till the flat is handed over, in about 18-24 months.

According to a recently released report by Citigroup, developers like Parsvnath, Uppal's, RPS Group, Gaursons India, Triveni Infrastructures and KDP Infrastructure are offering this scheme in select projects in NCR Delhi.

"We see these schemes as substitutes to discounts for boosting transaction activity," Citigroup analysts Ashish Jagnani and Aditya Narain wrote in their report on the Indian realty sector. "While this is expected to indirectly impact developer realisations by 18-20 per cent, it will provide near-term funds for construction.

"Big developers, who are still flush with funds, are yet to join the bandwagon. Developers, which are facing credit crunch due to lack of funding from private equity players, appear to be exercising this option.

"We are giving the monthly installments towards loan, provided the customer has opted for down payment and not construction linked and the loan tenure is for 20 years," said Pradeep Jain, chairman and managing director, Parsvnath Developers. The schemes is aimed at insuring the timely delivery of flats besides providing them (buyers) the comfort of not paying rent as well as monthly installments simultaneously, he added.

Others are packaging discounts in the form of EMI holidays. "We are giving a discount of 15 per cent for down payment customers, which is industry trend," said Rahul Gaur, managing director, Gaursons India. "In case customers borrow from financial institutions, we are offering discount equal to 24 months monthly installments through post-dated cheques."

The situation is different in Mumbai, which is yet to see this trend, but which experts believe should make an entry into the city soon.

"It is yet to be implemented in Maharashtra but several builders are thinking to start offering EMI holiday scheme here," said Mahesh Mudda, chairman of the Mumbai chapter of Builders Association of India (BIA). Most developers will hold on to high prices in the short-term. Things may change in the medium-to-long term, according to real estate industry experts.

However, experts also warn that buyers should wait before committing for such a deal as prices are set to crash in the next few months. Developers are holding on to their higher price levels despite a dip in demand for properties.

"Buyers are advised to understand this trend before buying a house, even in the light of special offers like EMI holidays," said Raminder Grover, CEO, Sandalwood Residential Services, Jones Lang Lasalle Meghraj a global rea1estate consultancy.

"It is possible that the area they have chosen may see a drop in rates over the next six to eight months."

According to Manohar Shraff, a real estate agent in Navi Mumbai, Diwali could be the right time to test the patience level of builders.

"Small builders here are in the lurch but they will hold on to the price line till Diwali," he said.

Courtesy: HT dtd. 30-05-08

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