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Capitalizing on market know-how and understanding of home buyers’ demands, local brokers are turning into builders
With the changing realty trends and expected market revival, many real estate brokers are turning into builders.
Real estate agents with sufficient funds and support from investors are trying their luck on the property market by launching projects of their own.
Explaining this trend, Pankaj Patel, Partner, Satyam Associates, a Mumbai based real estate brokerage firm, says, “Since brokers understand the market and buyers’ demands better than builders, getting into the development business is easy.”
Patel and his partner have recently launched three residential projects including a redevelopment project of 42 apartments in Malad, upcoming project of 270 Bungalows in Karjat and 56 apartments in Kalamboli.
Direct sale by builders
Rising competition from real estate portals, slowdown in the property market, uncertain economic condition and attractive deals by the builders to save brokerage charges has led traditional brokers to become developers.
This competitive market scenario has left the brokerage business paralyzed since builders have started direct sales.
Most commonly, developers attract buyers by offering rebate of two percent of the brokerage fee. This, in turn, has also benefitted builders as save commission charges.
Patel adds, “With slowdown in the realty market, builders have got into direct sales through SMSs, emails and real estate websites.
They offer zero percent brokerage charge, which completely outpaces brokers from the business.”
Ground level experience
Patel further expounded that with their ground level experience, brokers are expected to become better builders.
New entrants in the business face numerous hurdles related to rules and regulations and finance options, while brokers capitalize on their experience.
However, it has been witnessed that brokers who have entered the construction business keep their brokerage firms running simultaneously, while focussing on the former.
How brokers raise funds for construction business?
Since a large amount of money is involved in real estate business, brokers are entering into joint ventures with landowners.
Patel explains, “We get into 50-50 percent joint business with landowners and use their land for constructing a project.
The landowners trust us because they know we had sold inventories earlier and will manage to sell them again.
In addition, we sell some of the units to investors on no-profit-no-loss basis to raise construction funds. This way we work out funds for a project.”
Some real estate agents get into the business by joining hands with established developers. This helps them cover the construction cost and share expertise of both construction and brokerage businesses.
Though the property market is sluggish, real estate agents will make the most of their expertise while shelling off their inventory.
The technical know-how that brokers boast of in relation to selling stocks, incentivising inventory and preparing contract, will help them propel their businesses.
Parsvnath Developers is exemplary for many brokers as they once started their venture as a brokerage firm and later entered the construction business, becoming one of the most successful builders of Delhi NCR.
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