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Major Trends in the Organized Real Estate Brokerage Market

Saturday, May 18, 2019

By Raju Dham, Business Head for West & East India, 360 Realtors

During 2015-2017, many real estate markets in India suffered from snag due to softening of the demand and higher prevailing inventories. The slowdown has also been caused due to arduous policy makeovers such as demonetization, GST and RERA formalization.

However, despite downward pressure, there were silver lines in the industry, which will have long term positive impact. One of the major makeovers includes the organization of the brokerage space. Large brokerage houses such as 360 Realtors, Anarock, Square Yards and Prop Tigers, etc. have streamlined the entire property purchase cycle, which was hitherto haphazard & unstructured. Collectively, these organized brokerages, which are also called Institutional Channel Partners (ICP) have a market share of around 7%. It is expected to further pick up in the times ahead.

The relatively new ICP space itself is undergoing evolution. These entities are aggressively investing in expanding their foothold, opening new offices; adopt new innovations & much more. Mentioned below are some of the trends that mark the present day ICP space.  

Technology will be the Differentiator: Like numerous other industries, technology plays a crucial role in the Realty transaction space. ICPs understand it & are spending heavily into innovations, technology & analytics. A large number of monies are poured into developing state of the art user interfaces, digital marketing solutions, ERP & CRM tools. Likewise, they are emphasizing heavily on data analytics. Innumerable data points such as developers’ credibility, developers’ track record, location analysis, supply-demand dynamics, capital appreciation projection, rental returns, amenity check, infrastructure potential, etc. are deeply analyzed to offer discerning buyers a very unbiased, data-driven and transparent insights. Such an exhaustive approach helps in mitigating risk & taking the best possible decisions.

Sales force will still be the Core Competence: Though technology & innovation will be the differentiator, a prolific & capable sales-force would still be the cornerstone to success. ICPs understand very well that Real estate transaction cannot be completely done over the online space. A technological and innovative DNA needs to be augmented with strong ground presence and an extensive team of the sales force. Hence, they will continue to expand their sales team. Apart from the Real Estate industry, they will also look into other related industries such as BFSI, business consulting, B2B, etc. to hire seasoned & capable sales professionals.

Expand into the NRI Space: Presently, around 15-20% of the primary residential market in India is run by the NRI populace. Due to rising formalization & depreciation of Indian rupee, NRI investment into Indian Real Estate will continue to move up the curve. Hence ICPs such as 360 Realtors will expand further into the NRI market. 360 Realtors presently has 10+ international offices including Singapore, Dubai, Riyadh & Doha, etc. Recently it has acquired US-based RISA Realty & is set to become the 1st ICP to enter the American market. It plans to open new offices in a host of US cities such as New York, Chicago, Los Angeles, San Francisco, Boston & Washington.

Broker Aggregation: A major part of the property transaction space in India will still be in the hands of individual brokers, who have strong contacts in their locality. It is estimated that the top 10 major Indian cities have more than 200,000 brokers, resulting in a brokerage income of over INR 14,000 Crores annually. However, due to their unorganized nature, brokers sometimes fall short of adding value to the home buyers. Likewise, as they work as standalone units, many times big developers do not prefer them.

In order to bridge the existing gap, ICPs are coming up with channel partner programs. Through such initiatives, they are empanelling individual brokers and sharing their resources with them in the form of offering big projects to sell, better training & constant support in lead generation. As a result, now brokers are better able to sell their products & enhance their overall efficiency. These initiatives, which are mostly based on profit sharing are win-win for both- ICPs brokers.

In the times ahead, the ICP space will grow at an accelerated pace. From the current 7%, it is estimated that it will capture around one-fifth of the transaction space in next 3-4 years. The growth will stem out from growing formalization, changing customer preferences, value-driven innovations & powerful ground presence.

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