Real Estate Sales: Why This Festive Season Will Be More Special

The festive season that starts from October and ends in December is always considered very special for real estate developers, who eagerly wait for this period. These months, corresponding with the third quarter of a financial year, bring increased sales activity in the market, as prospective home buyers in India usually wait for these months to avail of attractive festive season offers and discounts.

“During festivals, a large number of people book their properties and most developers have lined up several innovative offers to make this period more special for their customers. With a positive sentiment floating in the market, we can expect a win-win situation for both developers and investors,” says Deepak Kapoor, president, CREDAI, Western Uttar Pradesh.

Besides festive season discounts, buyers put off their purchase decisions until the festive season also because this three-month period is considered auspicious for such momentous decisions as home purchase. Looking to cash in on this sentiment and the opportunity that lies in it, developers make their marketing strategies to cater to the large festive season demand.

CREDAI's Kapoor further adds: “Generally, during this time of the year, the atmosphere and mood of the public are cheerful and the outlook is positive. Home buyers will definitely feel encouraged to come and invest in the property market with several lucrative schemes offered by the developer's community.”

In what might be music to the ears of developers, struggling for a while amid high financial burden and low uptake, the festive season this year could see even better home sales activity than those in the past years.

Gradual recovery

A detailed analysis of numbers compiled by PropTiger DataLabs shows that the share of the third quarter (October-December) in total home sales during a financial year had stood at 23.77 per cent in FY14. Contrary to the popular belief that the festive season accounts for the bulk of real estate sales during a year, the share of Q3 in FY14 had been better than only the fourth quarter (22.94 per cent).

The share of the festive season improved marginally in FY15, with the October-December quarter accounting for 24.39 per cent of total sales during the year – an increase of 62 basis points. The third quarter's share, still, was better than only the final quarter (January-March), which accounted for 23.29 per cent of total sales.

The trend in FY16, however, showed a marked reversal for the better. In FY16, not only did the share of Q3 in total sales see a handsome jump of two percentage points, but the quarter was also the best one for the real estate industry in terms of the number of housing units sold. With a share of 26.39 per cent of total sales during the year, the festive season was the best-performing quarter in FY16.

A similar trend was seen across the nine major cities of India:

Ahmedabad: In terms of sales of property in Ahmedabad, the share of Q3 in total had stood at 23.34 per cent in FY14. This dropped to 21.07 per cent in FY15 and then saw a huge jump of 4.33 percentage points to 25.4 per cent in FY16.

Bengaluru: In Bangalore (now Bengaluru), the information technology capital of India, the share of Q3 in total sales declined a tad from 23.85 per cent in FY14 to 23.82 per cent in FY15. But FY16 saw a marked recovery, with Q3 accounting for 25.08 per cent of annual sales.

Chennai: Of the residential real estate units sold in Chennai through FY14, only 23.55 per cent had been sold in Q3. The share of Q3 declined further in FY15 to 22.31 per cent but then improved to 23.16 per cent in FY16.

Gurgaon: In Gurgaon, the share of Q3 in total sales during FY16 (24.89 per cent) was lower than that in the same quarter of FY15 (25.57 per cent), but it was higher than that it FY14 (24.08 per cent).

Hyderabad: The festive season's share in total annual residential real estate sales in Hyderabad, the city of Nizams, had seen a massive drop from 24.02 per cent in FY14 to 22.81 per cent in FY15. However, Q3 sales saw a marked recovery in FY16, with the quarter accounting for 25.12 per cent of total annual sales.

Kolkata: In the City of Joy, Kolkata, the festive season had brought little joy to the real estate sector in FY15; the share of Q3 had dropped to 22.58 per cent from 24.82 per cent in FY14. There was a recovery, albeit marginal, in FY16, when October-December accounted for 22.88 per cent of total annual sales.

Mumbai: In India's financial capital, Mumbai, the festive season had accounted for 25.10 per cent of total FY14 sales. This improved to 25.47 per cent in FY15 and further to 26.18 per cent in FY16.

Noida: From a low of 21.65 per cent of total in FY15, the share of the October-December quarter rose to 23.32 per cent in FY15 and then saw a massive jump of 9.46 percentage points to 32.78 per cent in FY16.

Pune: Maharashtra's cultural capital Pune saw the share of Q3 in total annual residential real estate sales increasing from 23.67 per cent in FY14 to 26.91 per cent in FY15 and further to 27.71 per cent in FY16.

Why festive season FY17 will be even better

If these consistent trends are anything to go by, there is enough reason to believe that the festive season this financial year (FY17) will see even higher sales than previous years, especially given that the real estate sector in India has lately seen some solid confidence-building measures. And, it is not from the real estate players alone; the government and the central bank have also made several moves this year to revive the real estate market. Here are a few that are sure to make a difference this financial year:

• More cash in hand: With the implementation of the 7^th Pay Commission recommendations, central government employees — both working and retired – have more investible cash. Though the salary increase suggested by the 7th Pay Commission is the lowest in 70 years in percent terms — 14.27 per cent hike in basic, and 23.55 per cent hike including several allowances and perks — any increase in pay packets of government employees is going to boost the overall urban spend. India's real estate sector, being the favourite asset class for government employees to park their money in, will certainly benefit the most.

• The RERA impact: The passage of the Real Estate (Regulation & Development) Bill, 2016, has reinstated confidence in the real estate sector among investors and home buyers. Now more assured about transparency and accountability of industry players, home buyers would be more willing to make the plunge. Those who had been sitting on the fence for want of regulations to ensure fair play and timely delivery of property would take the opportunity to cash in on the new and stringent accountability standards and make the purchase decision they had been putting off for long.

• Attractive interest rates on home loans: The Reserve Bank of India, under then Governor Raghuram Rajan, in April this year reduced the repo rate — the rate at which the central bank lends commercial banks — to 6.5 per cent, the lowest in 6 years. While some banks have reduced their lending rates to pass on some of the benefits to the end consumer, others are expected to come up with attractive festive season offers.