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Does the Builder actually Drops Price in Mumbai?

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Does the Builder actually Drops Price in Mumbai?

Last updated: August 1 2010
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  • Does the Builder actually Drops Price in Mumbai?

    Does anyone know if the builder actually drops price on an existing construction..

    Say Oberoi today is selling at 10500 psf.. and has sold 30% on that price.. Hypothetically let us assume the market dips.. Does he advertise that he now sells at 10000 psf...
    He has to manage the 30% who have paid him based on the obscene rate in the first place..
    I always read it in newspaper but have never had anyone actually getting the benefit..

    Even in 2009 when the rates dipped, when I approached some builders in Powai, they never dropped the rates on existing construction, but offered good deals on the new projects they were starting..
    The only loss the old timers had was the delay in their construction... as it took off only after the markets recovered..

    Which makes me wonder.. if rates will ever come down...
  • #2

    #2

    Re : Does the Builder actually Drops Price in Mumbai?

    Yes they do, but not entirely publicly.

    During 2009, ICICI bank had group deals for several properties that were selling at nearly 30% off their peak rates. Of course, you could argue that these were group rates.

    But I know some builders who actually even said that we've sold this for 11k, but you're getting it for 7.5k, because the market is so weak.

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    • #3

      #3

      Re : Does the Builder actually Drops Price in Mumbai?

      Good question sharpj, maybe they don't, who knows. You know it's funny, when you invest in a RE project , like every other investment there is a risk of losing some value of investment, with a change in market, now if the same project were to increase in value, these buyers would be overjoyed. They will not be lining up to give the builder the difference in what they paid and the increased rate, so i dunno why their 'feelings' should be a consideration if the prices were to dip some?
      Yet in reality, that's what happens.
      I think builder's will reduce prices, IF the market forces are too strong, and the builder needs the money. This ofcourse would not hold true for biggies like, raheja, hiranandani, etc.
      But like razer said, sometimes they do reduce the price, in a round about way like group discounts, or freebies like free parking spot, no floor rise, type.
      Honestly at this point all signs are pointing to the fact that mumbai RE is over priced and some correction is due, but as to If and when that will happen, your guess is as good as mine.

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      • #4

        #4

        Re : Does the Builder actually Drops Price in Mumbai?

        Group discounts always exist.. It's like .. This was worth x .. I am selling at a huge premium at X+50%.. but I give a discount as group if minimum 10 people do the booking at X+25%..

        I do not trust what a builder says.. I have sent friends to properties later to find out the rates and they were the same.. yes.. he gave me the spleen that this had risen to 10K.. but he is giving it at 8K.. which was the rate 1 year back.. in 08.. at its peak.. but he was selling the new phase at a huge discount and directing us to that..

        Originally posted by razer View Post
        Yes they do, but not entirely publicly.

        During 2009, ICICI bank had group deals for several properties that were selling at nearly 30% off their peak rates. Of course, you could argue that these were group rates.

        But I know some builders who actually even said that we've sold this for 11k, but you're getting it for 7.5k, because the market is so weak.

        Comment

        • #5

          #5

          Re : Does the Builder actually Drops Price in Mumbai?

          My understanding is that if a builder is able to sell 25-30% of his project he has broken - even. Everything depends on Cost and Sales.I have seen normally builders are able to sell 30% in 3-6 months of the project launch by good advertising, promos, freebies etc.
          The rest of the sale is something which can be guided by market forces which may or may not affect him unless the price correction happens across the board(across the city).

          for example a builder ABC announces a project of 100 flats at say 10000 psf where each flat is 600 psf. This means that if he sell 30 flats he gets abt 90% of project cost assuming his cost was ~3500 psf. Now it depends on him whether he wants to sell balance 70% project in 6 months or 2 years as everything now is profit. If prices go down he can wait and if they go up he will sell aggressively in the marketplace.
          MM

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          • #6

            #6

            Re : Does the Builder actually Drops Price in Mumbai?

            True.. there are many cases where I know.. the builder chooses whom he wants as investor for those investor flats he sells..
            Some HNI really beg with brokers having contact with the builder to use their influence to allow them to invest..

            Originally posted by Munish Malhautra View Post
            My understanding is that if a builder is able to sell 25-30% of his project he has broken - even. Everything depends on Cost and Sales.I have seen normally builders are able to sell 30% in 3-6 months of the project launch by good advertising, promos, freebies etc.
            The rest of the sale is something which can be guided by market forces which may or may not affect him unless the price correction happens across the board(across the city).

            for example a builder ABC announces a project of 100 flats at say 10000 psf where each flat is 600 psf. This means that if he sell 30 flats he gets abt 90% of project cost assuming his cost was ~3500 psf. Now it depends on him whether he wants to sell balance 70% project in 6 months or 2 years as everything now is profit. If prices go down he can wait and if they go up he will sell aggressively in the marketplace.

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            • #7

              #7

              Re : Does the Builder actually Drops Price in Mumbai?

              Originally posted by Sharpj View Post
              True.. there are many cases where I know.. the builder chooses whom he wants as investor for those investor flats he sells..
              Some HNI really beg with brokers having contact with the builder to use their influence to allow them to invest..
              Yes i have also heard some builders hold 10-15 % of flats for such kind of people, NRI, HNI or other investors. This is where they start their next game(next project)
              MM

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