In order to woo customers to a project, developers roll out many financial schemes and sops. Assured return scheme (ARS) is one such plan that attracts buyers faster than any other.
After the shock given by the stock market, people have been on the lookout for places where they can invest safely or go in for lowrisk investment options. ARS has long been popular with investors. The term itself means that the investors know beforehand the amount they stand to earn from their investments. However, it is only recently that ARS is being offered in the realty sector. Initially ARS was offered by developers for commercial properties only, but lately, it is being offered for residential properties as well.
Under such schemes, an investor signs an agreement with a company and is assured of a monthly return till the time of possession, at an agreed rate of interest. In case the developer enters into a tie-up with the owner or investor for a few more years after the date of possession, the developer finds a tenant on a rentsharing agreement.
ARS is invited, mostly, when a developer chooses to raise money directly from buyers for building their proposed project. It is better for the developer to arrange money from the investors and give them 10-12% assured return than to give 16-18% for the bank loan. By offering ARS, developers can easily raise credit by alternative means without keeping collateral security, as well as benefit from savings of a significant 6-8% on rate of interest.
Manoj Gaur, the managing director of Gaursons India Ltd, says: “Such schemes enable buyers to reap high returns in future, if they opt to retain the investment in such projects. The market is vibrant for developers who stand for diligence, quality and customer care – thorough professionals, in short – because it is the end users that constitute the larger portion of the market today. This segment also happens to be quality conscious and, perhaps, more aesthetically oriented in their requirements, making it the ideal audience for these kinds of offers to address with the commitment to quality and deliverables.”
Sunil Jindal, the chief executive officer of SVP Group, says: “The developers who bought land at peak rates will find it difficult to cope up with the competition thrown in their court. Developers who have bought land at the right time easily dole out incentives and offerings at discounted rates. So, the trend has started in reviving the market. And, to support it, the response from buyers has been good.”
“This is a lucrative option for investors also, as they are parking their money in safe hands and will get returns as well. However, before investing in an ARS, investors are advised to take some basic precautions to minimize the risks associated with property ARS. For example, one should do a comprehensive background check of the project; obtain a title search report for the property to make sure it’s free from all kinds of claims and legal encumbrances; and check (whether the project is located) has all requisite sanctions, licences and permissions from competent authorities,” says, Iqbal Singh Sodhi, the chairman of Saviour Builders.
In such schemes, developers generally target small investors, who fear investing money, and want regular returns.
Source – TOI