Realtors pushing unsold inventory on discount websites

From Business Standard

Faced with a large stock of unsold apartments, property developers are pushing their properties through real estate-focused websites, which sell them at a discount.

While group buying websites such as Groupon and Groffr have existed for a while and e-commerce portals like Snapdeal do festive home sales, new-age websites like SmartOwner and iBidMyHome offer individual buyers 20-30 per cent discount.

For instance, Bengaluru-focused SmartOwner – funded by undisclosed Silicon Valley investors – says buyers can expect up to 30 per cent discount on properties listed on its website and flexi down-payment options between 25 and 100 per cent. SmartOwner sells 100 properties every month and the quantum of deals is only steadily rising, says Vikram Chari, the portal’s CEO.

“From a developers’ perspective, they can very quickly liquidate inventory on a large scale if they use our services. That is why developers contact us when they need funding or wish to liquidate a large chunk of inventory quickly,” says Chari, in an e-mailed response.

Given the property market conditions, SmartOwner is in a sweet spot. Property developers need cash from sale of large unsold stock they are holding as they need to repay their loans and pay for development of existing projects.

According to PropTiger’s ‘Realty Decoder Q2FY16’ report, the top nine cities have over three lakh unsold housing units. The total unsold stock in Mumbai is at around 150,000 units, Bengaluru has 100,000 units and NCR has 140,000 units.

Recently, HDFC Realty – the realty-broking arm of HDFC – tied up with iBidMyHome for online home auctions, wherein buyers outbid each other for a particular apartment, which has a base price quoted by the developer and a reserve price quoted by the auctioneer. Buyers need to bid higher than the reserve price and the property goes to whoever bids the highest. The final price works out 20-25 per cent lower than the base price.

Vikram Goel, chief executive officer at HDFC Realty, said they received over 400 bids from prospective home buyers worth Rs 200 crore. “The idea was to find a solution to a large ready inventory. Builders have been sitting with a large inventory of ready flats and at the same time, customers want ready properties – the only thing they lacked was trust, transparency and the price expectations mismatch at both ends,” said Goel.

Even the more popular portals such as Snapdeal, claim to have sold apartments in large numbers during Diwali sales.

For instance, about 10,000 people registered to buy homes on Snapdeal’s Diwali Home Buying Fest where buyers were given a discount of Rs 500 per sq ft and other add-ons such as free parking, free registration etc. said it sold one lakh apartments worth Rs 250 crore during Diwali sale.

“We have got a lot of enquiries through iBidMyHome. But it is up to us to go up or below the price quoted,” said J C Sharma, vice-chairman at Bengaluru-based Sobha, which put apartments in two of its projects up for auction.

Amit Goenka, chief executive officer, Nisus Financial Services, said these websites employ large manpower and data analytics, which give them an edge over normal channels of sales and marketing.

“A website can sell 450 apartments in three days. But a developer may not be able to sell that many even in six months,” Goenka said.

Websites, said Goenka, give a lot of services such as home loan approvals online, verification of data, real-time inventory information, which developers cannot give in a short time.

Amit Bhagat, chief executive of ASK Property Investment Advisors, said since these portals had a ready audience, developers could reach out to lakhs of customers and look at generating fast liquidity.

“But the success of sites depends on how many transactions are done and how much developers are willing to go below the price recommended,” he said.

Leave a Reply

Your email address will not be published. Required fields are marked *