Developers offering property-swap scheme to homebuyers stuck in stalled projects

NEW DELHI: Cash-starved real estate developers in the National Capital Region are offering property-swap schemes to homebuyers stuck in stalled projects, providing them an option to switch to another property if they are ready to pay at least 70% of the price of the new property.

“We will accept customers from any stuck project and give him a flat at any of our under-construction or ready-to-move projects. Once we receive a request, we will contact other buyers of the same (stalled) project and that way we will get more customers without spending on marketing and brokerage,” said Yash Miglani, the managing director of Noida-based Migsun group. Builders such as Supertech and Bhutani are also coming up with such schemes and some brokerage firms are acting as an intermediary between developers. The developers aim to recover the balance amount, which the buyer had paid to the developer of the stuck project, whenever that project is completed and sold. The amount the homebuyer has paid to the first developer will be deducted from the new property that he or she is purchasing. Most of the homebuyers have paid 20-30% of the total amount. “So, for switching to a completely different project, the buyer needs to pay just the remaining amount,” said Honney Katyal, the founder of Noida-based brokerage firm Investors Clinic.

“For a builder, marketing, brokerage and profit account for 30% of the total cost. He can sell at 70% of the value if he is getting customers in bulk. That’s what we will do, to give a large number of customers to developers. The original developer also wants to save himself from legal hassles and would want to give exit,” Katyal added. Commercial property developers are also offering the same option as returns are higher in the segment. “Someone who has invested hard-earned money in a residential project would want to switch to commercial if he gets the option to swap. If we are getting a set of 20 customers from one developer, we won’t mind taking only the balance amount,” Bhutani Infra chief executive Ashish Bhutani said. About 200,000 housing units in the NCR are stuck with developers unable to complete the projects due to liquidity issues.

Leading consultants, however, said buyers should properly scan the details of such schemes.

“While developers may offer property-swap or other similar schemes to clear inventory, it would be important for homebuyers to exercise caution and study these schemes carefully. Schemes should be structured such that they offer a value proposition to both developers and homeowners. Homeowners may pursue these schemes only if they have the necessary experience to navigate through the fine print of these offers,” said Gaurav Kumar, CBRE India’s managing director – capital markets and residential services.