The good times are back for buyers in the real estate market. Some developers have begun to drop prices far more than the 10-20% done so far. And with interest rates clawing back to single digit levels, there looks to be good buying options emerging.

Four days ago, Bangalore based Alliance Group launched a premium mixed development project in Chennai’s Annanagar Extension at Rs 3,100 per sqft. That’s about 45% less than the rate (Rs 5,800/sqft) at the peak of the real estate boom.

The strategy is said to have worked. The company says in less than 60 hours over 300 units were sold. This at a time when sales for developers are down by almost 60% compared to last year.

The project comprises of over 2,000 housing units with a multiplex, and retail space.

Manoj Namburu, chairman of the Alliance Group, said that a similar marketing strategy was being considered for an upcoming project near Electronics City in Bangalore.
An industry analyst said that this discount would be on the peak price, and the actual discount to the prevailing price may be in the range of 20 per cent.

Developers are looking to cash in on the lower interest rates, and as many have put on hold their expansion plans they can afford to lower prices. Besides, if developers start seeing cash flows now, then by the next two quarters they would have created adequate liquidity, which would then enable them to re-start their expansion plans.

DLF was amongst the first major developers to bite the bullet and lower prices by 20% in Bangalore a month ago. But that clearly wasn’t sufficient to interest buyers. The company has now returned all buyer deposits and has deferred the project indefinitely. Only around 50 units had been sold. Their Cochin and Chennai projects too have met the same fate.

Bigger price drops is probably the answer to correcting the lean demand situation.