Four years ago, legislative changes opened the gates for a regulated and organized real estate sector and accelerated the consolidation process triggered by the slowdown. The message was clear - shape up or ship out.
As stringent compliances evolved and competition increased after the Real Estate (Regulation and Development) Act came into effect in May 2017, there was no room for non-professional and non-serious players, and a large number of small, unorganised and financially weak brokers had to shut shop.
The COVID-19 pandemic made it even worse for them, with brokerage businesses undergoing massive transformation.
Before RERA, small brokers had a free run, but following regulation and free flow of information to consumers due to the digital media explosion, the ecosystem brought consumer- centric brokerages to the fore. The unorganised family businesses gave way to more organised corporate style structures.
Today, digital technology is the new survival mantra. Though digital marketing was gaining prominence before COVID-19, the pandemic has brought into focus the need to have an online broking model in the wake of nationwide lockdowns. Real estate companies are spending more than 30 percent of their marketing budget in the digital space, and this is expected to touch 50 percent in the years ahead.
“Educated and tech-savvy independent brokers with thorough knowledge of micro-market projects are already becoming the go-to-choice for the very well-informed homebuyers,” said Ashwinder R Singh, CEO-Residential, Bhartiya Urban and best-selling author on residential real estate.
Bengaluru-based Brigade Group has increased the online share of its marketing operations to 60 percent. Mumbai- based Tata Housing has also been reimagining the prevailing distribution channels in the industry dominated by face-to-face interactions.
Proptech companies such as 247.in are leveraging tech, making use of artificial intelligence to provide a digital home buying experience with virtual 3D home tours, online negotiations and digital bookings. Anarock has joined hands with TTTE, a brand known for its creative concepts and marketing strategies.
Professional brokers are also making transactions risk free by holding funds securely in a secure, online, neutral KYC-authenticated escrow accounts and releasing them only when the deal is successful.
Developers get asset light; tie-up with broking firms
Despite the increasing role of technology in real estate transactions, several independent brokers are at the crossroads as they are not tech savvy. It is also tough for them to incur additional expenditure in training and technology to manage transactions.
Therefore, they are aligning with big brokers/firms for their marketing operations. Also, in the current real estate landscape where both developers and brokers face liquidity issues, collaboration to grow and sustain business is important. Cash-strapped developers are increasingly depending on real estate marketing companies to keep their Capex and Opex low.
This asset-light model suits developers as they have to pay marketing fee only when the transaction is fructified. It is not just developers, even brokerage firms are taking to the asset light model by collaborating with smaller independent brokers.
Gurgaon-headquartered institutional brokerage firm 360 Realtors which set up 360 Edge- a franchise partnership based business vertical just before the first wave of COVID-19, has managed to set up 35 franchise offices and more than 200 associates across India, generating a GTV (Gross transaction Value) of Rs 250 crore. The company is now targeting 75 offices and 500 business associates with a GTV of Rs 1,000 crore by the end of this year. Under this asset light-model, the company has managed to build a large network of independent franchises and businesses.
Ankit Kansal, MD, 360 Realtors, sees a feasible and sustainable model emerging with increased partnership between big players and small brokers alongside alternate models like channel partner activation and franchises.
“Larger players will offer marketing support , technical knowhow and operational bandwidth. This will help smaller players to increase their profit without additional Capex and opex. In return, big players will charge a percentage of the overall profits,” he said.
Integrated proptech brokerage platform Square Yards has launched Prefered Partner Programme aimed at forming alliances with independent real estate agents and smaller agencies. It has brought on board over 5000 co-branded stores across eight cities. These partners get full branding and marketing support to boost their online and offline presence.
The role of the broker
Brokers are expected to play a significant role. In mature markets such as the US where digital marketing has governed the realty space for long, there is a flourishing brokerage market. Since property is a big-ticket purchase, buyers prefer a one-to-one interaction before the actual sale takes place.
In India, the online medium is being used by property buyers to connect, research, seek information and get knowledge but the actual purchase still happens on site. Moreover, registration is still offline and property buyers have to physically deal with officials at the registration office.
Property buyers prefer real estate consultants as they offer multiple product choices whereas a developer showcases only his own offerings online. Moreover, new-age brokers are offering full service support (pre and post-sale) relating to information about the property, site visits, documentation, home loan, legal due diligence and even help in property registration and possession.
Also, the market today has much younger property buyers. Most of them are millennials who prefer to deal with well-educated and tech-savvy brokers. Also, after RERA, the real estate market has become organised and with the entry barrier in place for brokers, several qualified persons from the banking and insurance sectors are entering the brokerage business.
Today, the average minimum brokerage fee has risen to 2-3 percent from to 1-3 percent earlier. Brokers can command good brokerage if they provide volumes to developers who are now increasingly depending on brokers for front-end marketing operations.
There are close to 15 to 20 lakh organised/unorganised brokers. About 60,000 of them are empaneled with RERA. According to industry sources, about 2.5 lakh brokers are directly or indirectly registered, contributing 60-70 percent of brokerage business. With consolidation, one may see few large organised tech-savvy brokerage players dominating the market like in the US.
While these big brokerage firms will rule the market, small independent niche brokers will be associated with them through co-branding or aggregation. While the number of players may decrease, the overall bandwidth in the brokerage business may go up. Going forward, one may see more asset-light collaborative business platforms emerge in the real estate brokerage business.