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New Apartments, Complete With Kilo of Gold

A billboard on Ulitsa Sushchyovsky Val advertising Lider?€™s promotion offering a kilo of gold with new apartments. Vladimir Filonov

As the real estate market struggles to recover after the recession decimated demand and slowed building to a halt, some developers are doing anything they can to lure homeowners back to the market.

A couple of years ago, developers gave baseball caps as gifts to clients who just bought apartments, but to attract customers in a bear market firms are finding that they need to offer more valuable gifts.

Moscow-based developer Lider, which focuses on selling residential real estate, offers its clients "a treasure under every house."

The company promises one kilogram of gold to clients that buy apartments in three of its business-class residential complexes if they pay for at least 70 percent of the apartment's price up front.

Under the deal, Lider opens a metals account with a nominal value of one kilogram of gold at a bank, and the client can cash out the account at any time, the developer said.

"Such an unusual promotion is aimed to directly stimulate sales at our units and to attract attention to the company as a whole. It will have an impact on sales at other units of the company as well," said Grigory Altukhov, an adviser to Lider's president.

The campaign is attracting people, he said, adding that the number of clients participating in the promotion has doubled on average compared with the previous months.

"Gold is a perfect and reliable investment instrument, as is real estate. In the past 20 years, there was not a single year when the prices for at least one of these things didn't increase," Altukhov told The Moscow Times.

Gold traded at about $1,114 per ounce on spot markets Monday, putting the value of a kilogram at $39,300.

The market is in need of some flashy campaigns since the level of activity is low and it could use some stimulation, said Oleg Repchenko, director of the IRN.ru real estate portal.

But it's hard to estimate the efficiency of such promotions, since many developers are not public companies and don't reveal their sales information, said Igor Vasilyev, a real estate analyst at Troika Dialog.

While property prices have plummeted across the board, developers have been loath to lower the sticker price, fearing damage to the brand and discontent from earlier clients who might not have gotten the same deal in pre-crisis years.

Offering expensive gifts while maintaining the purchase price at previous levels in one way of luring new customers while protecting the brand.

But a good discount along with the guarantees that the construction will be finished on time are much more valuable to consumers than such gifts, Repchenko said.

That's the tack taken by Miel-Novostroiki, which says customers are more interested in cheap apartments than expensive gifts.

A couple of years ago, customers had plenty of cash and considered gifts as an additional bonus, but the situation has changed, said Oleg Yasinsky, marketing director at Miel-Novostroiki. The key point for customers was the apartment's price, he said.

In the past, Miel-Novostroiki tried luring customers with gifts as well. In 2007, the firm gave new Renault cars to the owners of its apartments in Dolgoprudny, in the Moscow region, and another district in the south of Moscow.

More recently, the developer has offered freed parking stalls in underground parking garages to those buying apartments in its Grand-Park residential complex in a November promotion.

The average price for a parking space in a business-class residential complex is 2 million rubles ($66,700), the developer said.

But now, the firm focuses on two kinds of promotions: installment plans and price discounts, Yasinsky said.

And plain-vanilla discounts may be just what the consumer is looking for in the current economic climate.

"A potential customer has a fixed sum that he is willing to spend. … That means the customer won't be able to pay more if a developer offers him a more expensive apartment along with a gift," said Vasilyev, of Troika.

"Sometimes the value of the offered gift is lower than a customer estimates, since companies usually get their future gifts for customers on a wholesale price, which is lower than the market price of the gift," he said.

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