Generally, maximization of sales is the primary business objective, for which various strategies are followed by companies and developers. One of those strategies is providing a discount or rebate to buyers as an incentive to own a property.
Discounts are the most common strategy used by the entities to enhance its sales, in which a deduction is made in the price of the product. Many confuse discounts with rebates.
So, what exactly rebates which are given by developers?
What are rebates?
A rebate is a form of buying discount and is an amount paid by way of reduction, return, or refund that is paid retrospectively. Basically, a rebate is the amount of the purchase price refunded by the developer to the broker/buyer.
Difference between discount and rebate
- General Differences
- The discount is a reduction in the face value of the goods allowed to the customers for making payment in stipulated time or purchasing products in big lots. Rebate, on the other hand, is a special kind of discount allowed to the customers when the purchases made by the buyer crosses the defined limit, in the specified period.
- Discount is used as a marketing strategy. Rebate is used as a sales strategy.
- Discount is allowed when the payment is made in time. Rebate is allowed when the full payment is made to the seller for purchases.
- Discount is available to all the customers. Rebate is available to those customers who fulfil the specific criteria.
- Discount is given for each item purchased by the customer. Rebate is given as a deduction in the list price provided the required conditions are satisfied.
- Differences You should be Aware of
- Discount offer package will have lower loan amount compare with rebate offer package.
- Loan instalment will be lesser in discount offer package compare with rebate offer package.
- Rebate offer package will allow you to receive it in the form of credit note or allows you to cash out as rebate where you directly may use it to cover the 10% down payment.
- There is a Lower Real Property Gain Tax (RPGT) in rebate offer package if you are to sell off the property within 5 years.
Do Rebates Affect Properties’ Intrinsic Value?
- Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Michael Kong told Property Advisor that it is obvious the offers given by the developers do not reflect the actual price of the house.
“Developers’ pricing has never been thoroughly verified or endorsed because they do not have to. They are selling prices which are entirely up to their discretion. They can sell 20%, 30% above the market price as there is no check and balance mechanism,” he said.
- REI Group CEO Dr Daniele Gambero said that due to rebates and discounts on top of tightening lending standards from the banks, the future value for the property market is expected to remain low and will take a longer time to recover.
- Metro Homes Realty Bhd executive director See Kok Loong said the rebates and discounts will give a negative impact to the industry as they do not reflect the real value of the asset and it is against the industry practice which requires high levels of transparency.
“If there is no transparency in the market, then it will not be an efficient environment. The market would take a longer period of time to recover without transparency and buyers turn up to be the victim of the scheme.
