Tony Fernandez (name changed), a property broker in Borivali in suburban Mumbai, recounts this story with some sadness. Two years ago, when he was selling a flat to a retired person, there was a delay in payment because of some paperwork.
As a result, the buyer had to pay some interest amount to the builder. While making the final payment, including the interest component, there was a shortfall of Rs 5,000. When the buyer requested for a month's time to pay that amount, the builder called him a liar.
Today, the same builder calls up Fernandez every day to enquire if there are buyers for his new building. "Even a year ago, builders would not bother to call us up and would give us some paltry sum as brokerage. Today, they are willing to offer up to 2 per cent and another 0.5 per cent, if we can sell more than two flats," says Fernandez.
But sales have been hard to come by. Earlier, Fernandez would sell two flats a month on an average, but in the last three months, he has not sold even a single flat. "Buyers come, see the flat and sometimes even haggle over the price. But later, they do not call back," adds Fernandez.
The situation is same in Thane. "Earlier, builders would refuse to pay us any brokerage for selling their flats. Our commissions mainly came from buyers. Now, even big builders are offering us 1.5-2 per cent," says a Thane-based broker.
It is not just areas like Borivali or Thane. All over Mumbai, the scenario is quite similar. In upmarket areas like Bandra and Khar, the going brokerage is as high as 4 per cent. "Builders call us within hours when we take a potential buyer to check out their building," says a broker from Bandra.
The keenness to sell is quite evident. For instance, brokers say, a very well-known builder in Khar area, whose old properties also command a premium in the secondary market, is now willing to double their commission from 1 to 2 per cent. In fact, some builders are going all out. According to another broker, a builder with a tower-project in Oshiwara has approached a set of brokers to market it.
The deal includes a flat commission of Rs 500-700 per square feet of area sold. On a price of Rs 9,000-10,000 per square feet, this implies a hefty 5-8 per cent brokerage. These big brokers, in turn, are offering 3-4 per cent commission to other brokers for selling the same.
The main reason for this is the cash crunch that many builders are facing. Many are paying in excess of 30 per cent interest for loans they have taken from financiers. With banks reluctant to lend and sales drying up, they are now luring agents to raise sales.
According to property experts, this is the last-ditch effort by many builders. Even last Diwali, the number of deals was down 30-40 per cent. Another bad buying season would mean that many builders would find themselves in serious financial trouble.