Lodha Blue Moon: Playing on buyers’ mind to create demand?
Moneylife Digital Team 01 February 2013

Exploiting the anxiety of missing out that the phrase ‘first come first served’ generates in the minds of buyers, the Lodha Group claims that it received tremendous response for its Worli property. However, two-three years ago, the developer had to seek help from local agents for selling flats in its Lodha Aqua project after failing in a similar mode of selling

Mumbai-based Lodha Group is again trying its luck at selling luxury apartments at its Worli property by creating demand through the “applications through exclusive invitation” route. But last time, when the developer tried this method for its “Lodha Aqua” project near Dahisar—on the outskirts of Mumbai—the move boomeranged. In fact, in May 2010 Lodha Group had to seek help from around 150 local real estate agents to sell properties in the project at reduced rates.

 

Whether the same thing would happen this time is not known, but Lodha has claimed ‘tremendous’ response for its “Blue Moon” project, similar to the Aqua project. The Lodha Group said it has received 1,300 applications from prospective buyers for an upcoming realty project, which is more than double the number of units up for sale.

 

“We sold over 1,300 applications for the Blue Moon residential project at Worli in central Mumbai, representing a sale value of nearly Rs6,000 crore. Nearly 30% of the applications came from non-resident Indians (NRIs) and persons of Indian origin (PIOs) while an equal proportion came in from cities like Delhi, Ahmedabad, Kolkata, Hyderabad and Bangalore,” the company said in a statement.

 

The project with over 600 units, costs Rs3.2 crore onwards per unit. According to Shiv Kumar (name changed), who was one of the invitees, their (Lodha’s) marketing agents launched a blitzkrieg to sell the apartments. “Few days back I met an executive of one of their marketing agencies. They are trying to market the apartments akin to a private placement of shares and are trying to whip up a sentiment that it will be a matter of chance to get a choice flat as demand is huge and applications are open only for few specified days and later allotment will be made by the developers to the lucky ones,” he said.

 

Creating anxiety in the minds of buyers that they will miss out on a great deal if they don’t act now is an old trick that has been played by businessmen. In the financial markets, it was seen in a host of public issues in the 1990s, the maiden mutual fund offer by Morgan Stanley in 1994 and the public issue of Reliance Power in 2008.

 

Another interesting gimmick used by the Lodha sales team is the price rise. The pre-launch consisted of two projects, codenamed Alpha and Gamma and house two, three and four bedroom apartments with starting prices between Rs3.2 crore and Rs6.66 crore, excluding 9% infrastructure (additional) charges. Following the pre-launch, Lodha has also announced that the launch price for the project will be at least 20% higher that the “pre-launch offer”.

 

This is surprising, as just a few days ago, Liases Foras Real Estate Rating & Research Pvt Ltd, in its third quarter review of the residential market, had said the price of new launches was 24% lower than that of the existing supply across India, indicating signs of correction and increase in affordable housing. The price level in the Mumbai Metropolitan Region (MMR) dropped 1% on a quarterly basis indicating the long-due correction in sight. The correction though small in magnitude, is likely to be welcomed by buyers, it said. (Read here Residential market: New launches outpace sales in third quarter)

 

Lodha said each applicant had to mandatorily state minimum of two preference codes and would have to accept any unit of the said configuration located anywhere in the relevant floor band. This means, the buyer can only choose type of apartment and floor and not the actual flat. Here are the options for the buyer...
 

Coming to payments, the developer said, the applicant needs to pay Rs9 lakh with his application in the name of Jawala Real Estate Pvt Ltd (a company it bought from DLF). The developer then selects the chosen ones and sends them the “allotment letter”.

 

If chosen, then the applicant would have to pay 10% of the total value within 21 days, excluding Rs9 lakh paid with the application. In case, the applicant does not want to buy the allotted apartment, he/she would have to inform the decision only through an email within 72 hours of receiving an email of allotment. In case, the applicant has been allotted the apartment as per his “preference code” and wants to cancel, he would have to forgo Rs3 lakh as cancellation charges and wait for the rest Rs6 lakh till 31 March 2013. In case, the applicant is allotted an apartment other than his preference code and wants to cancel, then he would get full amount on or before 31st March. The developer would refund the amounts without any interest.

 

The chosen ones would then have to pay the rest of the amount in instalments. Most interestingly, the developer would collect about 20% plus 9% (infrastructure charges) of the total value in just 75 days before commencing the project. In case the project starts on time, then the buyer would have to pay 10.1% for the foundation level and 6% and 5% for RCC work, 5% each for partition walls and external facade work and windows and 3% for possession for fit-outs. Here is the payment schedule....

Lodha has promised to give possession of the apartments by December 2017 with a grace period of 12 months. What is surprising is while the buyer would have to pay the money without fail or pay 18% interest, there is no such obligation on the developer. “Project will take four years with one year grace period without any penalty, while the buyers will be charged 18% interest p.a. for every day of delay in payment. This also means a full lock-in for five years or even more till the project is completed,” said Mr Kumar. (Read More controversy over Lodha's Aqua project)

 

The Lodha Group in August 2012 bought the land parcel from DLF’s unit Jawala Real Estate at Rs2,727 crore, including Rs1,200 for equity and debentures of the company and Rs1,500 crore towards liabilities of Jawala since buying the property from NTC in 2005. The valuation of DLF’s land was, however, lower compared with the Indiabulls’ deal in 2010 for 8.39 acre of NTC land for Rs1,580 crore.

Comments
Srinivas
1 decade ago
As much as Wadala is New Cuffe Parade, they may slowly extend Malabar Hill upto this new development !
hasmukh
1 decade ago
Property prices are already at their peak and will substantially correct now onwards. Only demand is from NRIs, who are not aware of current position.
madhukar sheth
1 decade ago
FORGET WORLI, IT IS NOT EVEN LOWER PAREL. THE PROJECT IS 400 METRES FROM ELPHINSTON RLY STN .
YOU DONT PAY ADVANCE TO A CAR MFRR TO BOOK, WHEN CAR IS HALF READY, WHEN PAINTING IS COMPLETED. tHEN WHY DO YOU PAY ADVANCE TO A BUILDER WHEN HE ANNOUNCES A PROJECT WITHOUT OWNING LAND ?
SUCH PROJECTS ARE CASH ACCRETIVE MADE WITH FOOLS' ADVANCES.
Chandramohan Amritkar
1 decade ago
The project is in Lower Parel and not Worli - this is clear mis-selling.
RAJESH NARANG
Replied to Chandramohan Amritkar comment 1 decade ago
THIS IS true even of LODHA AQUA . THOUGH IT IS SHOWN AS in DAHISAR for all practical purposes actually it is in MIRA ROAD. That makes the price lower by about 1500-2000 psft.
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