The real estate industry in India, including its residential and commercial properties, has for long, benefitted from the influx of black money from investors, wanting to blend their white money investments with illegal money. Additionally, most builders and developers have accepted the payment of black money, thus benefitting from reduced stamp duty payments from property sales, and taxes to the government. The demonetisation of Indian currency, with the ban on the older 500/- and 1000/- rupee note, has impacted not just real estate developers, but also home buyers and other parties. Impact on developers and builders The sudden ban of 500/- and 1000/- rupee notes has translated into a severe lack of cash in the market for real estate developers. Financial transactions, involving mostly cash, have been severely impacted, resulting in cash liquidity issues for real estate companies. Share prices of major real estate developers including DLF, India Bulls, and Lodha developers, have plunged following the demonetisation move. Additionally, the fall in housing demand due to limited cash flow, has meant a fall in the sale prices of residential and commercial properties, resulting in higher unsold inventory and reduced profit for the real estate developers. Impact on real estate buyers Real estate buyers, who rely on cash to purchase property, have also been adversely affected due to limited flow of high value currency bills. Middle-class home buyers, who have invested in under-construction properties, could see a delay in their project completion, due to the financial troubles of their property developers. On the positive side, potential home buyers are likely to benefit due to the slump in property prices, along with likely drop in home loan interest rates from banks and financial institutions. Impact on the overall real estate industry While the affordable housing sector is unlikely to be impacted due to its limited dependence on cash, the premium housing...
It seems that when builders and a group of buyers get together, then a mutually beneficial agreement can be worked out! This is what group buying is all about. Since the past few years, group home purchase has been touted as a viable home purchase option for those looking forward to get handsome discounts on home purchase, which is a win-win situation for both home buyers as well as for developers. Advantages to home buyers The typical home buyer is constantly in search of the best deals they can get on home purchase. Individuals cannot negotiate for a better deal as compared to those that form a group with those having interests similar to theirs. Otherwise, the transaction cost will be quite high for developers. As individuals, people would not have the power to make a deal with the developers, but united as a group, they will stand together to get the best deals on their home purchases. Typically, the percentage of discounts given to a group would be somewhere between 4 to 10 percent, meaning that if you spend INR 40 lakhs on a home, you would stand to gain INR 4 lakhs. Compelling proposition for property developers Group buying is also advantageous to the builders in that they stand to gain more money, when they sell houses to a group even after giving them a discount for bulk purchase of homes. The down payment is usually high in a bulk group home purchase. In the era of uncertain stock market and high interest rates, the higher down payment is a blessing for those developers, who are cash-strapped. Moreover, developers get a market that is readymade and they do not have to spend a dime in marketing homes to the buyers. This reduces their cost of selling and therefore, they are able to give the customers handsome...
