BENGALURU|MUMBAI: Property brokers across key markets are having it good these days, with a rise in their commission and brokerage – in some cases as high as 5-6% – since the past two quarters as realty developers are doing whatever it takes to push sales. Developers are also offering incentives such as foreign trips and iPhone 7 to get the momentum going. This is in sharp contrast to the usual practice of builders offering around 2% brokerage on transaction conclusion to channel partners.
“Property builders are now very friendly with brokers as sales have dropped considerably. Demonetization has further dented sales that were picking up in the festive season,” said J Sohail Sarooshi, managing partner at Ganapathi Estates, a Chennai-based brokerage firm. Like Sarooshi, many real estate brokers have seen business stagnating with clients deciding to keep their deals on hold for now.
“Builders are offering overseas trips to close transactions. The commission time has been reduced from six months to a month in some cases,” said Ashwin Chawwla, CEO of a real estate website. “It is easier to get 5% brokerage from builders who are in stress,” said Chawwla. Slowdown in the property market followed by demonetisation and worries over further clampdown on black money have led to a 40% drop in enquiries and sales of real estate across key markets of Mumbai, Delhi, Bengaluru and Pune.
Deals in the secondary market have come to a standstill with buyers and sellers waiting for clarity, while in the primary market, developers are looking to push fence-sitting home buyers. “Any lead is a good lead for builders. High tea and gala dinner parties are a regular now. Demand brokerage or pre-negotiated brokerage is the new norm in the industry. Earlier it was slab-based commission for brokers,” said Prashant Sambhargi, partner at Mars Properties, a Bengaluru-based brokerage.
Slower sales have prompted builders to offer schemes to attract fence sitters. In Mumbai, for instance, several developers are offering price assurance scheme on some of their projects. Likewise, most builders in Bengaluru and the National Capital Region have started offering price guarantee payback schemes if prices drop. They have also taken the burden of interest subventions scheme till the project is handed over.
“In addition to higher brokerage of up to 2%-3% for conclusion of apartment sales, plotted developments and weekend homes are fetching even beyond 5-6% commission. This is likely to change only after market revival; it will take time before property markets get comfortable with various changes we are seeing around,” said Yashwant Dalal, President, Estate Agents Association of India, the oldest brokers body in India.
According to an NCR-based realty developer, many not-so-serious property brokers managed to conclude lot of deals during the earlier up cycle and home buyers were also satisfied with the regular price appreciation that they were witnessing in their properties. However, these brokers could not advise them on right exit and that led to stuck investments. Either the brokers are not operating anymore or investors are not ready to trust them.
This has given existing brokers, who enjoy customers’ faith, an upper hand in huge unsold inventory scenario and are thus fetching higher commission. According to Knight Frank, home sales as well as unsold inventory in the top eight cities of India dropped. As on December end, unsold housing inventory level in the top eight cities stood at 6.72 lakh units. Of this, unsold inventory in the NCR is the highest at 1.93 lakh units.
Credits ET Realty