Updated February 27th, 2024 at 17:31 IST

'Buy now, pay later' schemes gain traction in Mumbai real estate

Buyers can make a small initial payment, usually 10% to 20% of the total property cost, with the balance due upon possession.

Reported by: Business Desk
Mumbai | Image:Pixabay

Real estate payment revival: The Mumbai real estate market has seen a revival of "Buy Now, Pay Later" schemes in recent months, a tactic reminiscent of the strategies deployed during the real estate slowdown between 2015 and 2019. This financing approach enables buyers to make a minimal upfront payment, typically around 10 per cent or 20 per cent of the total property price, with the remaining amount payable upon receiving possession.

This resurgence of such schemes comes amid a softening demand for primary sales in the Mumbai real estate sector. The market has been affected by an oversupply of inventory resulting from a surge in property launches over the past two years. In response to this trend, developers are reintroducing flexible payment options to stimulate sales.

Developer payment plans

Several prominent developers in the Mumbai real estate scene, including Macrotech Developers (Lodha), Keystone Realtors (Rustomjee Group), Raymond Realtors, Wadhwa, Runwal, and Ambit, have rolled out such flexible payment offers within the last six months. For instance, Lodha is presenting buyers with an option to pay 25 per cent upfront for its Thane project, with the remainder due upon receipt of the occupation certificate (OC). Similarly, the Raymond group allows buyers to make a 20 per cent upfront payment and defer the rest until January 2025.

Developer competition dynamics

Industry experts attribute this resurgence of subvention schemes to heightened competition amongst developers. With an increasing number of property launches and a surplus of supply, developers are compelled to offer incentives to sustain sales momentum. The staggered payment options also align with developers' cash flow strategies following the Covid-19 pandemic.

"Given the surge in property launches and the abundance of supply, developers feel the need to provide incentives to differentiate themselves and sustain their sales pace. The option of staggered payments also fits well with developers' strengthened cash flows in the aftermath of the Covid-19 pandemic," said LC Mittal, Director, Motia Group.

"Publicly listed developers engage in these strategies as they are obligated to present their pre-sales figures quarterly to investors. To manage cash flow, developers either seek financing from banks or opt to sell at reduced prices through creative incentives. The initial payments made by homebuyers serve as collateral for developers and facilitate securing loans from banks," Mittal added.

Furthermore, data from the Maharashtra Real Estate Regulatory Authority (MahaRERA) indicates a substantial rise in the number of units launched in Mumbai city limits, jumping from 25,404 in 2020 to 52,771 in 2023.


Published February 27th, 2024 at 15:41 IST

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