Why offer Incentives?

jeff2007

Hi there, I've been looking a various projects in Northern Morocco and have come across a few agents and in particular the developer’s Superior real estate who is now offering numerous incentives on this project. For example, I received an email recently about Superior offering a 5% deposit paid and free furnishings facility. If these resorts are all as good as everyone is saying, why then do they have to throw in such incentives? I can perhaps understand a company offering furnishings, but why pay the 5% for a purchaser if the development is already selling well!

tootsie

Hi Jeff,

My understanding is that because Superior have taken over the project from Fadesa (they were originally supposed to be the constructors of this project), they have had a hard time selling it. Plus, with the fadesa brand name out of the equation, superior have a lot of catching up to do and hence offering incentives.

There's another discussion on this here:
Fadesa no longer the Constructor!!!

To be fair though, just because developers are offering incentives does not necessarily mean its a bad thing. Sometimes they do it to shift the units quicker than the norm. Sometimes, its just a kick start marketing ploy for publicity. And sometimes, it's a bad thing!!

With this particular project, however, since Superior are the construction/development company, I'd actually stay away from the project. If it was Fadesa, things would be different.

Good luck though.

camel

Apart from the reasons mentioned by Tootsie. There are now many similar kind of projects in the North of Morocco in terms of facilities, M2, location, price per M2 etc. So how does one stand out from another ???????????????

Prolan

Hi Jeff2007,

Developers all offer some kind of incentive or discount. This is simple economics, the sooner they sell out the quicker they can move on with the next project.

Most developers (especially the smaller ones) have to fund the building works with moneys from pre-sales, off-plan sales...in exchange for your trust and money, they of course give you some incentives.

jeff2007

Ok people, I hear what you are saying, but I still feel that with Morocco now trying to be a major player in the world tourism market and the internal government strategy of investing millions into infrastructure and property, developers shouldn’t really have to offer incentives. I appreciate that they may want to sell early, and move on to their next development but why take a cut in profits when your going to sell the product anyway, it’s just about timing isn’t it?

Prolan

Hi Jeff2007

You just said it: it's all about timing. In development you need cashflow. Selling or getting reservations as quickly as possible to be able to move onto the next phase of the project. That's why everywhere developers offer discounts.

It's also about the correct mix. Selling a number of units at discounted price today and leaving some to sell at higher price with the next release.

Believe me: as a developer I'd rather raise some cash through discounted sales instead of diluting the company capital over too many shareholders. At the end everyone wins, the clients who get the discount, the developers who get their sales and cash and the shareholders of the developers who get higher returns on investment.

Regards,
Prolan