Housing finance schemes get new thrust

Jun 06 2014, 09:45 IST
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A slump in demand for residential real estate has brought financing schemes like ‘80:20’ and ‘75:25’ back to the market in a different avatar. A slump in demand for residential real estate has brought financing schemes like ‘80:20’ and ‘75:25’ back to the market in a different avatar.
SummaryA slump in demand for residential real estate has seen innovative financing schemes like the ‘80:20’ and ‘75:25’ schemes return to the market in a different avatar.

in a construction-linked manner, which is a good thing,” says Srinivasan Gopalan, chief financial officer and chief operating officer, at Wadhwa Group. The Mumbai-based real estate developer is offering a 75:25 scheme for its Imperial Heights project in the western suburbs of Goregaon.

The need to reintroduce these schemes can be explained with the high levels of inventory that builders are sitting on. According to data released in May by ratings and research firm Liases Foras, real estate developers in major metropolitan cities continue to have higher levels of inventory between 20 and 43 months (the time it is expected to take for the entire stock of residential properties to get sold). Mumbai Metropolitan Region has the highest inventory of 43 months, followed by Hyderabad at 42 months and the National Capital Region of Delhi at 39 months. The normal inventory level for real estate developers in a healthy market is eight months.

“These schemes do help increase sales of a project. It is seen that in a big-ticket project (Rs 1 crore and above), such schemes give a 15-20% fillip to sales, while in small-ticket projects, there is a fillip of about 30%,” said Om Ahuja, chief executive (residential services), Jones Lang LaSalle India, a property consulting firm.

Siddharth Bhatia, head of marketing at Wadhwa Group, adds that such schemes are introduced only when a project under construction has made some headway in terms of securing necessary clearances so that banks have certain sense of comfort in lending for the project.

Bharat Dhuppar, the chief marketing officer at Mumbai-based Omkar Realtors and Developers, said that the scheme in its current form is finding favour with customers because it eases the burden on their pockets and customers can enjoy the benefit of property appreciation by investing lesser than what they would have to otherwise.

For developers, the only benefit is in attracting more customers to buy houses in their projects, says Dhuppar. In the earlier scheme where banks would disburse funds to the developer upfront, real estate developers were able to secure the money at a fixed rate of interest, but with payments being made construction-linked, the rate of interest that the developer has to pay is floating and, hence, volatile.

Omkar is offering this scheme on demand, for its Alta Monte residential project in the western suburbs of Malad in Mumbai.

Bangalore-based Puravankara Projects has tweaked the 75:25 scheme for its

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