Bottom Line: Weather is yet to turn cold but the property market is too cold on the eve of festive season. And hence, to beat the blues developers are trying to convince & confuse that all is well with unsubstantiated sales claims.
Another developer claims to have sold 975 units worth INR 1,000 crore
A developer advertises to have sold 50% inventory one week and 80% next week. The very next week advertises to have sold complete inventory with an offer of buy back at a premium
Developer projects its sales booking to rise to INR 3,000 crore during 2018-19 fiscal on the back of improved demand especially from ready-to-move-in apartments
Such misleading claims prima facie give an impression that the property market in the Indian cities in general, and Delhi-NCR in particular, have peaked up on the eve of long festive season ahead. The claims nevertheless raise more questions than could answer as to how and why there has been sudden spurt in the sales velocity.
For instance, the developer claiming to have sold 5,000 units within our months refuses to give sales figure. The analysts & brokers active in this part of the world maintain that the number is overly inflated. Moreover, most of the whatever bookings that the developer has is nothing more than expression of interest with a cheque of just INR 10,000 rupees.
Similarly, sales figure of INR 1,000 crore with 975 units suggest an average unit price of INR 1 crore and above. But the developer also simultaneously claims that the bouquet has affordable housing stock as well. The average ticket size of affordable housing in this market is below INR 50 lakh. Therefore, the law of averages in terms of unit versus sales number would justify the figure only if the developer is also selling inventory in the price range of INR 5-7 crore; something that is not there in the portfolio of the developer.
The guerrilla marketing of selling 50% in one week, 80% next week, and then 100% with the offer of buyback is nothing but the developer’s desperate attempt to push the sales in the second phase of the project. The market has to be confused that the developer has rewarded the first movers in phase one of the project.
One common thread in all these misleading claims is the fact that all these developers are not listed entities and hence it is not possible to ascertain the exact sales number. Doesn’t it look ironic that a developer that claims to sell 5,000 units in four months or someone optimistic to sell INR 3,000 crores in a given fiscal is not even a listed entity?
Rakesh Gupta, a broker active in Delhi-NCR admits that the sales claims appear to be highly optimistic on part of the developers. According to him, with most of the developers having pretty poor brand strategists and sales team, they are often themselves being misled by professionals who paint a rosy picture before the developers. Such marketing numbers are nothing but wishful thoughts which are juxtaposed to the market realities. He also questions the legality of such misleading claims.
“Now that the new accounting norms does not allow Percentage Completion Method (PCM) and the developers can only book profits after the completion of the project, these claims of so much of revenue are also violating the statutory norms. I think it is just the beginning of the festive season and actual scenario will emerge during Navratra only,” says Gupta.
Nikhil Hawelia, Managing Director of Hawelia Group sounds cautious when he admits that the new launched projects and under-construction ones have few takers. According to him, this festive season promises to be good for sales mostly with the developers who have ready to move inventory with them.
“With the kind of inquiry that I am getting nowadays I am quite optimistic that the festive season would be one of the best in recent times. Of course, the buyer today is pretty clear that all that they would be willing to buy is ready to move in houses. In a way it is good for the market as we the developers have the responsibility to complete our pending projects,” says Hawelia.
Developers’ optimism apart, the ground reality is that there is no reliable data available that could suggest the sales velocity has been accelerated ahead of festive season. The actual data would be accessible only post the festivals but what could be vouchsafed at this point of time is the fact that misleading sales claims galore this season.