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City realtors turn to small-town brokers to help tide over crisis


City realtors turn to small-town brokers to help tide over crisis

Last updated: June 3 2011
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  • City realtors turn to small-town brokers to help tide over crisis

    AHMEDABAD/NEW DELHI: Unlike many of his counterparts in Mumbai and Delhi-NCR, Pankaj Ashok, proprietor of Ashoka Realty - a real estate brokerage firm in Patna - is a busy man these days. He recently cut deals with employees of Indian Oil Corp in Patna and Barauni to sell 50 apartments in Noida. The Noida-based builders showered Ashok with incentives including an LCD television and now, he is waiting for his car.

    Builders in big cities are turning to small-town brokers like Ashok to tap the rural rich, like lichee growers in Muzaffarpur, orchard owners in the hill towns and small entrepreneurs in Rajkot to help them stave a slide in sale of homes which began a year ago. According to PropEquity, a real estate consultancy firm, in the first quarter of 2011, home sales in Mumbai dropped 17%, Bangalore 14% and Hyderabad 15%. Unsold inventories in Mumbai are up 25% and in Delhi-NCR 16%, leading to huge losses.

    Shiv Priya, executive director of Amrapali, which has appointed Ashok as agent, says: "We are tapping brokers in smaller towns with huge numbers of high networth individuals who have enough appetite to buy homes. Nearly a quarter of our current sales are coming through investors in towns like Gaya, Indore, Raipur, Begusarai, Mokama, Muzaffarpur and Guwahati, among others."

    A Mumbai-based developer, who didn't want to be identified, is trying to lure real-estate brokers to sell his projects to rich farmers and businessmen in smaller cities of Gujarat. He has offered the agents a free mid-sized sedan for selling two residential apartment or six times the normal brokerage fee for every plot of land sold. He has also appointed agents in Uttar Pradesh, Rajasthan and Punjab, hoping to get business there. His agents have promised him that if the price is right, there are enough rich people in these towns who are interested to invest. "Developers from bigger cities are calling us up from everywhere.

    Every week, one or the other builder is seeking an appointment with us," says Pravin Bavadiya, president of Ahmedabad Realtors' Association, who also owns the local property brokerage firm City Estate Management . He recounts his recent experience with developers like Mumbai's Lodha Group , Ramky Infrastructure from Hyderabad, Noida-based Earth Infrastructure and Gardenia Group and the Bangalore-based Prestige Developers, "While some developers have been offering us six times our normal brokerage fee, others are providing free sedans for selling two-three residential units in their project."

    Manan Choksi, regional director of Remax, says: "The other day DLF approached us to promote its luxury residential project in Goa and their project in Chennai to investors in Gujarat."

    A third of Gujarat's real estate investors actively pursue opportunities in Mumbai because of this city's economic and historical links with the financial capital. A certain segment of investors from Pune also view Bangalore and Mumbai favourably. "However, now investors from the rich agricultural belts of Haryana, Punjab and Western Uttar Pradesh, orchard and hotel owners from Himachal Pradesh and Uttarakhand and the merchant communities from Rajasthan and UP are also interested in properties in big cities," says Ashutosh Limaye, director, strategic consulting at Jones Lang LaSalle India.

    Amit Goenka, national director of global property consultant, Knight Frank, puts the trend in perspective. "With demand in the primary market drying up, the developers in bigger cities have to look outside their core consumer base."

    While builders do not want to openly talk about it, they are offering sizeable discounts to buyers in this small towns, unlike in their primary markets where they are maintaining prices, fearing that a correction may end up in a crash.

    Pankaj Ashok says he has the mandate from many other builders in Delhi-NCR, and he is targeting group buyers. "I try to sell apartments in blocks of 10-15 or more as I also can get them a good discount from the builder. Most workers in industrial belts have transferable jobs and their children relocate to big cities after finishing their school," he says. According to him, 70% of his clients are buying for their children, while 30% are investors.

    Ashok says he takes appointments with employees through the HR department of these firms, and then goes to these towns and makes a presentation on a laptop. "During my trip to Indian Oil in Barauni, 50-odd employees attended my presentation," he says.

    While buyers fall to the discounts and the lure of owning an apartment in the big city, brokers like Ashok are in it because of the incentives they get. Shiv Priya of Amrapali says a broker is usually given a small car in addition to his brokerage fee on selling twenty-five or more flats. If he sells ten or more, he will get an LCD TV or a laptop.

    Harvesp Mehta, director, real estate at Motilal Oswal Private Equity Advisors says, "Investor-led demand for residential properties in Delhi and Mumbai property markets constitutes about 40% of the sales volume. In other cities, investor-led demand typically constitutes 20-25% of the sales volume. Hence the greater reliance of Delhi and Mumbai based developers on investor-led demand...."
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