The real estate market in Pune has undergone a significant transformation in recent years, with pre-launch sales via Expression of Interest (EOI) becoming the dominant trend. Majorly of inventory is now being sold through EOI before official project launches. While it may seem like an opportunity to get early access to a promising project, EOI comes with substantial risks for homebuyers. Let’s explore why this practice can be dangerous for customers and how it contributes to artificial price inflation.
1. EOI Creates an Illusion of Demand, Driving Up Prices
One of the biggest concerns with EOI is its role in artificially inflating prices. When developers receive a high number of EOIs, they often use it as a justification to increase the final price of the project. The logic is simple – higher demand equals higher price.
On the other hand, when a project receives fewer EOIs, developers are more inclined to keep prices reasonable to attract buyers. This suggests that EOIs are not just a measure of interest but a tool for developers to gauge how much they can push prices upward. Customers indirectly contribute to price hikes by willingly participating in EOIs, giving developers the confidence to charge more.
Additionally, some developers strategically inflate EOI numbers by counting multiple inquiries or non-serious buyers to create a perception of high demand. This artificially fuels a price surge, leaving genuine buyers with inflated property rates.
2. Negligible Room for Negotiation Compared to Sustenance Projects
Unlike sustenance projects, where there is scope for negotiation based on market conditions and unsold inventory, EOI projects leave little to no room for bargaining. Buyers commit to a price range without clarity on the final pricing, and once the official rates are announced, they find themselves locked into a deal with minimal flexibility.
Developers capitalize on the urgency and fear of missing out (FOMO) to eliminate negotiation power. In contrast, completed or under-construction projects allow buyers to negotiate based on real-time market conditions, inventory availability, and competitive offers from other projects.
3. Customers Are Unknowingly Driving Artificial Price Inflation
A crucial factor often overlooked is that buyers themselves play a role in fueling price inflation. When customers rush to secure a unit by paying EOIs, it signals to developers that people are willing to buy at higher rates. Consequently, builders continue to raise prices with each phase of the project, creating an artificial cycle of inflation.
Had buyers collectively resisted EOIs, developers would have been forced to launch projects with competitive pricing to attract interest. But as long as there’s a continuous inflow of EOIs, builders have no reason to keep prices within a reasonable bracket.
Moreover, since EOI payments are often refundable, many buyers book multiple units in different projects, creating an illusion of high demand. However, once prices go up, many drop out, leaving genuine buyers stuck with inflated rates.
4. The Risk of Market Volatility and Project Delays
Another overlooked danger is that pre-launch projects come with uncertainties. Regulatory approvals, financial constraints, and changing market conditions can lead to delays or even project cancellations. Since EOIs are often taken without a legally binding agreement, buyers may face difficulties in getting refunds or renegotiating terms if the project doesn’t progress as expected.
Additionally, a sudden market correction can make EOI-based investments risky. Buyers who commit early might find themselves paying significantly higher than those who buy later, once the real demand stabilizes.
Some projects take years to materialize, and by then, market conditions may have changed. Interest rates, developer reputation, or even neighborhood development can shift, making an early purchase less attractive.
5. Verifying Price Inflation in a Particular Locality
The impact of EOI on artificial price hikes can be verified by analyzing price trends in a specific locality. If a builder collects a large number of EOIs before launch, the launch price tends to be substantially higher than the initial quoted price. In contrast, projects that receive fewer EOIs or follow traditional sales models tend to be priced more competitively.
Observing the price movements of different projects in the same area over time indicates how EOIs create an upward pressure on property rates, often outpacing actual market demand.
For instance, recent case studies from Pune’s high-demand areas like Wakad, Hinjewadi, and Kharadi show that projects with a high volume of EOIs launched at prices 10-20% higher than initially estimated. However, similar projects in the same locality that relied on traditional marketing had a more stable pricing model.
6. The Psychological Trap of FOMO (Fear of Missing Out)
Many buyers fall into the EOI trap due to fear of missing out. Developers intentionally create a sense of urgency, claiming that a limited number of units are available and that prices will rise post-launch. This leads buyers to make hasty decisions without thoroughly analyzing the actual value of the property.
However, history has shown that not all EOI-based projects perform well in the long run. Some projects fail to maintain their high prices, and buyers who paid a premium in pre-launch later find themselves at a loss.
Conclusion: Should You Avoid EOI?
While EOI might seem like an attractive option for early access to a project, buyers must be cautious about its implications. Before committing, consider:
- Is the pricing justified, or is it being artificially increased due to high EOI participation?
- Are there better deals available in sustenance projects where negotiation is possible?
- Are you prepared for potential delays and uncertainties in a pre-launch project?
- Has the developer historically delivered projects on time, or have they faced delays and pricing fluctuations?
Ultimately, the best way to counteract artificial inflation is for buyers to make informed decisions rather than rushing into EOIs based on market hype. The power to keep prices in check lies in the hands of the customers themselves. If buyers collectively resist inflated pre-launch pricing, developers will be forced to offer fair and competitive rates.
As a real estate expert, my advice is simple: Be strategic, not impulsive. Research thoroughly before committing to an EOI, and don’t fall for artificial scarcity tactics used to justify price hikes.
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