Developers Offer New Down Payment Norms to Woo Customers
As the property prices continuously go up everyday in Mumbai making it more difficult to buy a house, realtors in association with banking corporations have come up with new upfront payment norms in an attempt to woo more property buyers. The new upfront payment norms may be a sweet news for buyers who are planning to shelve their plans of buying a house in Mumbai due to the current norms of down payment and burden of EMIs.
The Scheme
The common scheme for making payments till now while purchasing a house has been the 20:80 mode, where a buyer pays 20% of the total amount as down payment and the remaining 80% as EMIs. The new scheme, which is 10:80:10 will give a breather to cash crunched buyers. In this new scheme, the buyer has to pay only 10% as down payment, 80% through bank loans during the construction period and the remaining 10% after taking possession of the property.
The scheme is being brought out with a mutual understanding between the builders and banks. The new scheme will help the buyers in easing out the burden of down payment by halving it. A buyer is expected to save about 50% on the interest costs. The negative impact on the bank is not much as it will gain more customers for loans. The developer too can offset a hit by gaining more buyers.
Tata Housing has already announced the 10:80:10 scheme for its ‘Amantra’ project on the Thane-Kalyan road. It has currently tied up with Axis Bank, Tata Capital and HDFC for this scheme. Depending on the response to this project, the developer may extend the scheme to few other projects.
Nirmal Lifestyle, another builder has come up with a 10:10:80 scheme for its ‘Sports City’ project, which is a minor variation to the above scheme. Here, a buyer will make a down payment of 10%, another 10% at the beginning of the construction and the remaining 80% on slab basis depending on the stage of construction. This scheme is rolled out in association with HDFC, ICICI Bank and India Bulls Finance.
The scheme though attractive, may work for a short term. According to Jones Lang Lasalle, Knight Frank, and Cushman and Wakefield, the offers may help the developers to increase their sales on a short term basis. The schemes will also replace high cost debts with low cost debts. However, sustained sales over a long term can happen only with the overall reduction of property prices. Consumer affordability and confidence in economic conditions play major roles in deciding the sustained absorption in residential housing.
