Why ‘Buy Now, Pay Later’ Is Resurging in Mumbai’s Real Estate Market
In recent months, the Mumbai real estate market has experienced a noticeable softening in primary sales, attributed to a variety of factors such as economic uncertainties and changes in buyer preferences.
This slowdown follows a period of growth that ensued after the Maharashtra government’s announcement in January 2021, waiving 50 per cent of developers’ permission fees, stimulating the market. However, the surge in launches over the past two years has resulted in an oversupply of inventory, prompting real estate developers in Mumbai to reassess their sales strategies. One prominent trend making a comeback is the reintroduction of “Buy Now, Pay Later” schemes, also known as subvention schemes or flexible payment options. Notable developers such as Macrotech Developers (Lodha), Keystone Realtors (Rustomjee Group), Raymond Realtors, Wadhwa, Runwal, and Ambit have embraced these schemes in the last six months.
For instance, Lodha is enticing buyers with an option of 25% upfront payment and the remaining 75% upon receiving the occupation certificate (OC) for its Thane project. Similarly, the Raymond group, in Thane as well, offers a unique proposition of paying 20% upfront and deferring the rest until January 2025. This trend extends to other developers, with the Rustomjee group unveiling flexible payment options during Diwali in November 2023.
Industry experts, including Rajendra Sharma, Chairman and MD at Ambit Realtors and Developers, suggest that the reintroduction of the 20:80 subvention scheme strategically aims to attract homebuyers, expedite inventory off-take, improve cash flow and reduce carrying costs. The Wadhwa Group is aligning its subvention offers with projects expecting OC within three to six months, according to Navin Makhija, Managing Director of the group.
The resurgence of developer subvention schemes is not only a response to softened demand but also heightened competition in the market. With an increasing number of launches, developers find themselves compelled to offer incentives to stand out and maintain sales momentum. Ritesh Mehta, Senior Director and Head at JLL India, a real estate consultancy firm, notes that the flexibility of staggered payments aligns well with developers’ robust cash flows post COVID-19.
Listed players, driven by the need to show pre-sales numbers every quarter to investors, are also adopting these schemes. Ravi Kewalramani, Director at RK Mumbai Realtors, explains that commitments received from homebuyers making the initial payment act as collateral for developers, aiding them in raising loans from banks.
The surge in launches, particularly in the 1-BHK category, has been a noteworthy aspect, accounting for 34% of units launched in the second half of 2023. Additionally, the 3.5 and 4-BHK categories witnessed the highest launches in three years in 2023, reflecting the evolving dynamics of the Mumbai real estate market.
In conclusion, the resurgence of ‘Buy Now, Pay Later’ schemes reflects a strategic response to challenges posed by softened demand, oversupply, and increased competition. Developers are adapting their sales strategies to align with changing market dynamics, providing buyers with flexible payment options in a bid to stand out and maintain sales momentum.
