Pre-sale figures inflated by real estate developers: the background to the data

Pre-sale figures inflated by real estate developers: the background to the data

Pre-sales are when customers hold a unit in a development by giving the developer a small payment. But the figures developers proudly display often conceal a nuanced reality.

In spite of laws such as the Real Estate Regulatory Act (RERA), real estate developers nationwide and in the Mumbai real estate market participate in pre-launch activities to determine prospective price and assess market demand. These gradual releases

Real estate developers flaunt pre-sales statistics in the hundreds of crores every quarter, particularly toward the conclusion of the financial year, portraying them as markers of the strength of the market. However, behind the surface is a mixture of real sales and overstated figures.

According to insiders, developers in the real estate markets of Mumbai and other parts of the nation sometimes record transactions based on token amounts that are as low as 1 to 5 percent. Sometimes they even falsely inflate sales numbers to reassure investors by selling units to other developers or channel partners.

What precisely are pre-sales, then?

Pre-sales are the first commitments made by investors or homeowners to acquire a unit in real estate, usually in exchange for a small payment to the developer. For developers, these numbers are vital because they help them prove that there is a market for their projects when they launch and get funds.

Impressive pre-sales numbers provide developers leverage throughout the launch period, boosting trust in both investors and purchasers. But reaching these targets often calls for calculated risks, including providing discounts or working with channel partners to boost sales.

Developers have been known to revive plans such as 'buy now, pay later' in order to increase buyer interest in the Mumbai real estate market, among other markets. These programs, which are common during recessions, let purchasers pay a portion of the whole amount up advance and collect the remaining balance upon delivery.

Remarkable sales figures achieved by providing flexible plans and incentives assist builders in drawing in purchasers by enhancing the perception that their property is selling quickly.

In order to obtain reservations from purchasers, it also helps developers and channel partners—also known as real estate consultants—create an atmosphere that fosters the Fear of Missing Out (FoMO) effect.

However, what about pre-sales prior to project clearance and launch?

Developers participate in pre-launch activities in violation of laws such as the Real Estate Regulatory Act (RERA) in order to assess market demand and determine possible price. Before receiving formal permissions, these soft launches allow companies to gauge demand and adjust their plans.

However, as developers are not allowed to promote or sell projects prior to RERA registration, these methods sometimes straddle legal lines. Authorities resolute in their vow to prosecute developers who violate these restrictions, such as the Gujarat RERA, have recently indicated a tightening of control over pre-launch activities.