Realty portals push many property brokers out of business
Sep 11, 2013
Source : The Economic Times

 

BANGALORE/NEW DELHI/MUMBAI: Falling home sales and rising competition from real estate portals has pushed many traditional property brokers out of business while forcing others to work on wafer-thin margins.

The market for property brokers, who had flourised during the real estate boom not so long ago, has shrunk with builders and individual sellers preferring direct sales or the services of real estate portals that are ready to facilitate deals for free. The shrinking market is also driving down the number of applications for real estate broking licences.

In Bangalore, it has fallen by 10% over the last two years, said Rahul Pai, governing body member of Bangalore Realtors Association-India (BRA-I). "At the BRA-I AGM in August, members talked at large about the competition from various sources like internet portals that are posing stiff competition to the traditional brokers," said Pai.

"This, added to the unfavorable market conditions in real estate, has made it worse for brokers. In fact, several small-time brokers have actually gone out of business and are coming to us looking for jobs." The gloom is evident in Delhi, Mumbai and Kolkata too.

In Mumbai, builders are approaching clients and investors directly through in-house marketing teams, which offer dedicated service to prospective investors and help save the 3% commission builders would have paid to property dealers. Developers are increasingly using direct marketing initiatives like e-mails, text messages and pre-launches to push their offerings.

The few builders that are still working with brokers have reduced brokerage charges to 3%-4% from 6%-8% earlier. Most developers have also withdrawn the preferential location charges that were earlier being promised to brokers.

"All large developers who are members of CREDAI (real estate apex body) have their own marketing team or are in the process of developing their own sales team for better customer service and building direct relationship with customers," said Harsh Vardhan Patodia, president, CREDAI Bengal and vice-president CREDAI National.

Gaurav Gupta, joint secretary of Raj Nagar Extention Association, said: "With the slowdown happening in the market, most developers are now getting into direct sales and cutting down on the cost of the brokerage." Referral clients, too, are posing a threat to the broking community.

"Builders are now luring new buyers through their present clientele, eliminating the role of agents and brokers," said Jyoti Shroff, partner at Bangalore-based real estate consultancy Tirupati Associates. "A reference of a prospective client gets the buyer up to Rs 50,000 discount. This has led to fall in our business by about 50%, especially in the last six months."

Akhil Kapur of real estate brokerage firm AJ Housing said his revenue is down by 20%-30%. "The number of transactions has not changed but the price band of transactions has come down, which indirectly affects my revenue," Kapur said. Brokers in Delhi echo the same sentiment.

"Transactions are not happening and there is no movement in the market. Our business has come down by more than 50%," said Sumit Joshi, director, Real Credit Consultancy, a mid-sized real estate broking firm in Noida. "Brokers who are unable to sustain are relocating from premier locations to smaller offices elsewhere and are also trying their hand at other businesses."

Websites, too, are playing spoilsport for brokers. "Certain developers are at the moment more bullish on the online sites and social media to promote their properties among NRIs and strengthening their direct sales," Gupta said.

Bangalore-based Common-Floor.com is sending out chauffer-driven BMWs and Mercedes to pick up premium clients for sight visits—facilities that a broker would never be able to match. "There is now a market trend of online customer enquiries, which are being serviced directly by the builders, and this is picking up to the extent of 15% to 20% of the total sales in the below Rs 50 lakh segment. In this category, the main lead generation takes place through the project publicity and promotion," CREDAI's Patodia said.

Unlike the markets of north and south, the role of brokers was elementary in the east. But, over the past few years, the trend of brokers marketing a project had picked up in West Bengal. Following the rough patch now, brokers across the east are in a fix as builders endorse orthodox ways of direct sale.

"Kolkata market is not only run by end users but also salaried speculators, who do not live in the city. The latter generally seek brokers' help to locate and zero in on a property. As investments have gone down in real estate, the broking market too has invariably seen a crash," said Sanjay Jain, MD, Siddha Group, which recently sold 70% of its property through direct sales.

 

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