Bottom Line: In real estate the slowdown has brought sea change in the marketing format, methodology and approach. To cut the marketing cost the focus has shifted on the online portals. A section of analysts are even giving an impression that it has the potential to throw traditional brokers out of the business. Track2Realty evaluates the probability.
This is probably one of the wishful thoughts of the developers that have been over projected round the year (NRI investment being the other). But a ground zero study of the property market across the key cities indicate that the online property portals offering real estate deals may have made inroads like never before, this definitely is not the end of traditional brokerage or substitute of traditional format of selling through taking clients to see it and believe it.
The developers nevertheless are over glorifying it, with reasons cited as low cost & high impact to urban buyers’ being net savvy and now the latest craze of portals catering to the NRIs.
However, beyond this wishful and fancy thought of the developers and a section of analysts lies the fact that the developers are still trying best to woo the brokers, but the success rate and conversion ratio is increasingly falling.
Officially most of the developers refused to either comment or admit but the fact of the matter is that the brokerage in most of the property markets across the country has gone up from 3-4 per cent to 7-9 per cent in the wake of slackening demand and piling up inventories.
In Delhi-NCR some of the developers are being forced to offer up to 12-16 per cent as brokerage to dispose of the inventory that is adding to their debt burden with every passing day. That still is not working and as investment in real estate has gone down, so has the business of brokerage. This is precisely the reason that developers are betting on less expensive medium of an active marketing channel.
In order to cut the marketing cost, developers are increasingly using direct marketing initiatives like e-mails, text messages and pre-launches to push their offerings. They are also relying on the referral marketing by the buyers by offering discounts and other incentives, thus expanding the definition of broker itself.
While some of the developers are strengthening their in-house sales team, others feel it is not feasible, especially if the sales don’t happen in a regular cycle. Even some of the brokers who have successfully managed to maintain a large team by getting into volume game, now find the business model not sustainable in the wake of slowing sales. Even the brokers who graduated to become realtors themselves are finding large in-house sales team unviable.
Does it mean dependence on the brokers is inevitable for the developers? More importantly, can the online portals fill the void that has surfaced in the sales channel due to demand slowdown in general?
Not many in the business agree with this, nor all the developers are available for the buyers beyond mere lip service. And hence, bypassing a broker is not a wise option in the Indian context where there is a huge gap between the promise online and performance on ground. Brokers are equipped to navigate the complex maze that a property transaction is, and it is often not possible to do without the essential human interface and the personalised service that portals normally don’t provide.
Portals may have their advantages in marketing when seen from a developer’s perspective, and in information aggregation, but brokers are not to be discounted for their intimate knowledge of the situation on the ground. Moreover, a portal does not display problems about a locality. In tier-II and tier-III towns, very few buyers would go on a portal.
So, it is not as much about the traditional brokers being out of the business and property portals catering to the buyers. Rather it is more about the wave of change in the business of brokerage the way certain other industries have gone through. Some of the neutral analysts believe what played out in the travel services industry where increasing access to information and deals through the internet led to buyers drifting away from the travel agent onto travel portals, leading to many in the profession radically reinventing themselves to remain relevant or shutting shop.
Problem with the traditional brokers in India is that they have so far been mere primary level intermediaries. The time has come for its emergence into a profession. The portals can only be an effective tool in lead generation, but after that human interface is always needed. As a matter of fact, some of the portals are actually trying to offer services that the old school of brokers never thought of. For example, one of the portals is sending out chauffer-driven BMWs and Mercedes to pick up premium clients for site visits.
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 per cent of the total sales. Most of such enquiries are generally in mid segment projects that are priced below Rs 50 lakh. In this category, the main lead generation takes place through the project publicity and promotion.
Industry practitioners believe the situation is not such that it is portals versus the broker. According to Ashok Sinha, a leading property agent in Delhi-NCR, property portals are better to be used as primary search and research. “Portals are a good mass marketing vehicle for the developer, something his sales team can not achieve. Virtual walkthroughs on the web can reduce the time spent on physically visiting five developments and then zeroing in on one. Portals aggregate information and that helps a customer reach an informed decision. When one has clear expectations, a broker too gives a better level of service,” says Sinha.
Brokers grounded in the business with traditional means assert it is almost impossible to eliminate their services and more so in the resale segment. They maintain that for a home buyer, the home is the most significant investment of lifetime.
And hence, one cannot discount the value a broker brings with his knowledge of the market and procedures. In a property market like India that lacks transparency in process and projects, where the professional due diligence services has not really been introduced, an average home buyer has to have the services of a skilled and personalised human interface.
Whether the brokers continue to do so with enhanced skill sets or services, or the online portals make further inroads does not change either the demand of the buyer or his needs vis-à-vis the expert intermediary.
No doubt, property portals are picking up and making inroads, but they have a long way to go before it could be vouchsafed that online portals are end-to-end solution for the home buyers. Developers, of course, wish it happens as it cuts their marketing cost. Till the time wishes are answered comprehensively, the debate goes on.