Transcripts: 4 May IPO Style Home Sales by Builders

Very Good Evening, everyone first of all many thanks for the enthusiastic response to the last
video, which I’ve released a few days back it got a thunderous response and has encouraged
me to speak more on issues pertaining to the public. Today, in this video, I am going to raise a
recent trend in which I have observed IPO-style home apartment flash sale. Recently, DLF
sold out two projects within days of launching DLF The Arbour in Gurgaon and DLF Privana
South in Gurgaon. The typical apartment prices in these projects range from 7 to 9 Cr, which
is not a small sum. Yet, DLF the reality major, informed to the stock exchanges that all the
flats 1000+ in each project costing 7 to 9 crores were sold out within 3 days as a layman I
wondered how it is possible? Probably, Gurgaon has a major affluent buyer base, which we
can’t deny because half of India’s top corporates are there. But then how can such expensive
apartments sell out? At the same time, other builders have also started making bold
announcements. One more luxury apartment group builder in Gurgaon said that they sold out
within 24 hours- 48 hours, and then we have some builders making various announcements
joining the builders as the channel partners. When a project is launched, you can see the
builders they have their websites, they have their sales offices, they can directly deal with the
customers and take booking from the customer yet these developers they insist that you go
through channel partners by these, I mean a large number of developers anyone can see the
trends I don’t want take names as such what happens with you, this has happened with me
also that a channel partner would contact you Mr. Pratap there is this new project coming up
please hurry up and make a booking else the flats would be sold already. There is a huge
demand for these flats. So, saying this I believe that many channel partner they extort the
home buyer to quickly book, failing which all the apartments would get sold out and this is
what they believe adds to the rush. Now, is this good for the housing sector? I say it is not.
Let us begin with DLF Privana South. DLF Privana South is located on the southern outskirts
of Gurgaon near the Aravalli hills and that area if you look at the google earth satellite
imagery, it is not developed even the roads I mean as per the latest imagery available on
google earth the roads in that area are not yet laid or rather are in process of being laid and
civic infrastructure is just in the beginning to come up. So, in such an area where,
theoretically, the real estate prices should be lower, the project is sold out at almost 40%
above the prices of the apartments in the surrounding areas. I believe that it was probably due
to the flash sale which was organised by the builders and I believe that a major role in these
flash sales is pushed by the channel partners who are brokers who are tasked with selling of
the projects so what I believe in many flash sale projects happens behind the back is that the
builder he might plan a fixed date for launch, the builder will contact his channel partners and
then channel partners will start building up enthusiasm within the home buyers they will start
spreading the word about the project and more often than not you will notice that in many
projects in which the builders want to do flash sale, they will start pre- RERA marketing of
those projects that is the channel partners will start marketing the projects even before such
projects get RERA registration, of course I’m not saying it for any one specific project and
I’m not taking any names here but because it has also happened with me personally brokers
have contacted me I asked them Sir please show me the RERA registration paper, broker says
that the projects hasn’t been registered as of now but make sure you book early else as soon
as it get registered it would be known to all and would be quickly sold out. Such marketing
practices lead to inflated real estate prices. Why? Because had the anticipation not been built
up had the channel partner not created hype about the project or had the channel partners not
created a hype about an artificial scarcity in the flats, then the people would have approached
the project at a more relaxed pace they would go visit the sales office they would study all the
plans they would take quotations from other projects look at other areas and then of course
the pace of the sales would have been slower and the whole buyers probably would have had
a good window to negotiate on the price negotiate bargains and discounts etc but by creating
a hype over the project,by doing media publicity of flash sales several multi- crores
apartments sold out in a span of few minutes, few hours or few days. Developers ensure that
the project can sell at a much higher price than what it would expect in a lower market. For
the builder for the channel partner, they will laugh all the way to the bank but what about the
home buyers? Home buyers of course would look at multiple amenities he’ll look at the nice
flashy, glitzy interiors and exteriors he’ll look at the clubhouse etc. but he must beware
because in such projects commercial value is whether the buyer will get a good return on his
investment that remains a question mark because, unlike a regular project which could be
more reasonable prices, these projects tend to be over-hyped and overpriced and home buyers
should always take such sorts of marketing with a pinch of salt. I strongly believe that a
realistic commercial sense and a real estate biz sense should be there in every project. The
prices should be reasonable and reflect current market trends and any attempt to create
artificial scarcity and to encourage IPO-style flash sale of apartments at higher prices should
be deprecated by the real estate regulators and I call upon the real estate regulatory authority
of various states in India to thoroughly investigate such practices and invoke their powers of
inquiry under Section 35 of the RERA Act and scrutinise whether such sale practices reflect
genuine market trends? Are they in the home buyers interest? Are they likely to lure the home
buyer either into a debt trap or into an overpriced investment that runs the risk of giving acute
stress to the home buyer? Remember paying of home loan EMIs is not easy initially the ads
might look very glitzy but as two years pass, three years pass, four years pass the weight, the
financial weight of the expense will come to bear upon the home buyer, that is why I strongly
believe that a concerned effort is required on the part of the real estate regulatory authorities
in India and strict and thorough investigation must be done into any cases where builder
make bold announcements of the entire project inventory selling out in a few days’ time. I am
Advocate Aditya Pratap and I practice law in the Bombay High Court, I hope you found this
video helpful and do subscribe for more. Thankyou!