New Delhi - Indian builders hit by slipping profits are offering free cars and gold to kickstart once-booming demand but experts warn the gimmicks may not keep the housing industry afloat.
The gifts range from Toyota four-wheel drives to gold coins and foreign vacations.
"The response has been great," said Rajesh Kaul, international sales head of Jaypee Greens developers, which is giving away luxury automobiles with bungalows priced above 30 million rupees.
In one novel buy-one-get-one-free scheme, estate agent Cosmos is throwing in one-bedroom apartments with each bungalow sold in Mumbai's suburbs.
Smaller gifts include 50-gram gold nuggets (worth about $1 200) offered by SVP Builders in Ghaziabad city, while industry officials say family vacations to Europe or club memberships are also being used to tempt customers.
India's housing market was worth $12bn in 2005 and had been forecast to grow to $90bn by 2015. But it has felt the pinch since last summer when demand began dropping.
The crisis has deepened this year with high interest rates on home loans and double-digit inflation reducing property purchases by 20%, according to official data.
And those who are still buying are on tight budgets.
"The 4.5 million to 7 million rupee housing segment was the most sought-after," Prashan Agarwal, of property portal allchecksdeal.com, told the Hindustan Times.
Confidence-building measures are needed
"Now queries are geared towards affordable housing in the 2.5 million and 4 million rupee segment."
Several builders are sitting out the lull on the sidelines.
Hindustan Construction Company, one of India's largest builders, has put on hold three planned townships in the hope interest rates will dip again and help bring down mortgage rates.
"One will have to wait and watch how the situation unfolds," chairperson Ajit Gulabchand said.
"Lower interest rates, greater liquidity and confidence-building measures are needed," he told reporters, as data showed the industry was weakening even before the global financial turmoil reached Indian shores.
Bluechip group Parsvnath developers posted a 17% rise in revenues in the year ending March 2008 compared with staggering 135% growth the previous year.
Leading developer Unitech saw sales growth slip to 26% in the last fiscal year compared with 253% the previous year.
Parsvnath, which has said it is planning to build cheaper apartments, warned imaginative sweeteners were not a long-term solution.
"The present conditions will lead to a slowdown in implementation of projects and instead of selling at losses, developers would delay projects," Parsvnath managing director Pradeep Jain told the Times of India.
Jaypee's marketing head Kaul warned that gimmicks would not protect builders, and only those with deep pockets were likely to survive shrinking demand and razor-sharp competition.
- Sapa