The past two years haven’t been the best for the real estate sector that is witnessing the effects of a general slowdown in the economy. A recent study by the global property consultant Knight Frank says that during the last two financial years i.e. FY’11-FY’13, absorption levels of residential properties in the seven largest cities plummeted by 23 per cent. During the same period, launches were down 37 per cent, the result of high prices, high interest rates that have led to waning buyer interest.
Caught within this downward spiral is an important player in the sector: the property broker who has to deal with the new reality of falling transactions. It seems like a redux from 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 or in extreme cases, shutting shop.
Is the real estate broker today in the same boat as his counterpart in the travel industry not so long ago, given the emergence of real estate portals and virtual walkthroughs?
“The current times are definitely not the easiest for individual brokers. The economic slowdown has conspired to make property buyers in the budget and mid-income segments more cash-conservative. For such buyers, the brokerage involved in buying a home through an agent is seen as an expense that should, if possible, be circumvented,” says Anuj Puri, chairman and country head, Jones Lang LaSalle India.
For the broker, though, it’s time to undergo a shift. “Business is going to change drastically. It will lead to the emergence of the new-age broker who has to deliver a high quality of service. Honesty, integrity and transparency will be paramount. Property brokerage has so far been a vocation, meaning brokers were primary level intermediaries. The time has come for its emergence into a profession,” says Sam Chopra, chairman, Re/Max India, a property brokerage operating on the franchise model, present in 35 cities in the country.
Chopra adds that in the current climate, enquiries have dropped by almost 75-80 per cent, investor transactions by 40-50 per cent. The end-user segment is not slowed drastically, although it too is down 10 per cent, all the more reason for brokers to position themselves well.
Anil Kumar Sharma, president of the Confederation of Real Estate Developers Associations of India (CREDAI)-NCR says that the emergence of portals has led to a shift in the manner the business is conducted. “A majority of buyers tend to rely on portals and prefer to compare rates and facilities provided by various developers. The new age buyer prefers to engage with developer directly,” says Sharma.
The situation is not such that it is portals versus the broker, says Shobhit Agarwal, MD, Protiviti Consulting. “Portals are a good mass marketing vehicle for the developer, something his sales teams cannot 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 give a better level of service,” says”Agarwal.
An added incentive is that portals do not charge the prospective customer for making use of its services and content. Brokers typically charge in the range of 1 per cent each from both buyer and developer.
But then, bypassing a broker is not a wise option as they 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 no portal can match. Brokers too have risen to the occasion.
“The entry of portals has no doubt brought more professionalism into the market and has posed a challenge to ‘traditional’ broker shops. Brokers themselves list their properties on portals and have their own listings on their own websites,” says PSN Rao, chairman, National Association of Realtors India, a body working towards training of brokers and bringing in global standards to the industry.
POWER TO THE BROKER
“It is almost impossible to eliminate brokers and more so in the resale segment.” says Ashok Badiani, a broker from south Mumbai. “The portals and sales teams cannot match our services. In India, buyers need personalised service, right from finding the place till performing the pooja while moving in.”
Given the fact that for a home buyer, the home is the most significant investment, one cannot discount the value a broker brings with his knowledge of the market and procedures. “You may know the provisions of the Income Tax Act. Yet most of us utilise the services of a professional to file our returns. The same is the utility of a broker,” says Chopra.
“The work of a realtor is very tedious,” says Shridhar Malwe, a broker from central Mumbai. “Once a brief is given, the broker runs around to identify a range of suitable options. He will visit all the sites, and arranges the meeting between the buyer and the seller, negotiates on behalf of the client. He also arranges to get the copies of documents for verification and in many cases, arranges the meeting between the office bearers of the society and the buyer.”
“Brokers offer a host of ‘hand holding’ services for documentation and ‘walkthrough’ the officialdom for closing the transaction paperwork,” adds Rao.
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. “Does a portal display problems about a locality? In tier-II and tier-III towns, very few would go on a portal since here even a dhaabaa owner and a paanwala could be working as the part-time brokers. The trust and transparency levels in these cases are very high since the person is very well known to you and helps you as a broker as well,” says Sushila Verma, who has operations in Pune and the hill station of Lonavla.
This has been acknowledged by portals themselves. “Our main customers are brokers. We have upgraded our offerings with special tools for them. Without them, portals cannot work,” says Hitesh Oberoi, co-promoter and CEO, Infoedge that runs the portal 99acres.com, which gets 50 lakh visitors every month.
Clearly, with the advent of new information sources, a slowdown may be the best opportunity for individuals who have entered the profession to evaluate their commitment to it. “Many individual brokers who saw success in the boom period had left steady jobs and chose this as a means to offset the loss of handsome salaries. But no successful business gets into the big league without learning the hard lessons of a downturn,” says Puri.
But then brokers would always remain an integral part of the profession, says Rao. “While the internet as a medium is excellent for scanning choices and seiving information, it is no substitute for a broker. Even in highly evolved markets like the US where internet penetration is almost full, brokers flourish and transactions always happen through a representative of the buyer or seller.”