Mumbai: Mumbai resident Madhumita Mondal got the real estate bug earlier this year and decided to buy an apartment. She did it online.
Using the e-commerce site Snapdeal.com, Mondal spent Rs.10.1 million ($159,000) for a three-bedroom apartment in a condominium being built on the outskirts of Mumbai. Usually Mondal buys dresses and books on Snapdeal, but after seeing an advertisement there for apartments, she found buying online saved time and money.
“The experience has been way better than going through property agencies in the off-line space,” said Mondal, who with her fellow civil servant husband expects to take occupancy by the end of next year. “There was absolute clarity on architectural plans and property details, and I did trust the developer and e-commerce platform.”
While it may be hard to imagine spending millions of rupees online, thousands of Indians are doing it. Internet sales of property are taking off, as developers find it helps get rid of excess supply and as consumers find ease of use coupled with discounts. In the past few weeks, Tata Housing Development Co. and Mantri Developers Ltd. each sold apartments worth almost $1 million on Snapdeal, one of several sites including 99acres.com and Housing.com that have been selling property online for the past year. Tata Housing alone reports more than 1,500 apartments sold online.
The e-commerce platforms promise lower prices. “Get unbelievable discounts,” Snapdeal says in an advertisement on its website.
“Indians are very cost conscious and believe that mass buying and e-commerce platforms are a cheaper way to buy anything,” said Boman Irani, chairman and managing director of Mumbai-based developer Rustomjee Group, which has sold more than 30 apartments online using a brokerage site that directs buyers to Rustomjee to complete the sale. “While in India we are traditionalists about a lot of things, we have been open to what technology can bring. I am betting big on how the Internet can change the way in which apartments are sold.”
The online sales sites work the same as a developer’s showroom for a new construction, but instead of having to go in person to look at proposed models and photos and feel sales pressure to buy, the would-be customer can take time to click around. A view of the neighbourhood, what the building and unit are promised to look like, ratings and reviews by other buyers and even an animated, three-dimensional walk-through of a furnished apartment are often available.
In a typical discount, a Rs.6.5 million apartment being built by Ardente Realtors in Bengaluru was being offered with at least Rs.800,000 off interest payments on a mortgage if purchased through Housing.com—12 percent of the purchase price.
Once the customer makes a down payment of about $1,600 through the e-commerce platform, the developer gets in touch with the buyer to help arrange mortgage financing through a bank, if needed, or the option to pay the balance using online banking.
Commissions for online sellers are lower than for offline real estate brokers, Rustomjee’s Irani said, without giving details. Snapdeal also declined to disclose commissions.
Developers are using the sites to try to offload excess supply in some markets. In Mumbai, unsold homes totaled 192.3 million square feet in the first quarter of this year, which would take 46 months to be sold at the current pace, according to Liases Foras Real Estate Rating and Research Pvt., a Mumbai- based real estate consulting and research firm. A healthy market maintains between eight and 12 months of inventory.
The All-India Residential Property Price Index, which tracks home prices in 13 cities, increased less than 4% in the last quarter of 2014 from the previous year, the lowest rate since mid-2011, according to the Reserve Bank of India. Mumbai housing prices fell by more than 3% in the end-2014 period compared with the year before.
Chinese developers have also offered discounted apartments online. China Vanke Co., the country’s biggest developer, teamed up with Alibaba Group Holding Ltd. last year to lure homebuyers who also shopped on the e-commerce company’s Taobao Marketplace.
“Things sold well on the Internet are often things that are oversupplied,” said David He, a Hong Kong-based partner and managing director at the Boston Consulting Group, who pointed to similar conditions of excess in China’s real estate market.
India has 39 million people shopping on the Internet, one- eighth the number in China. The India e-commerce market is projected by Chicago-based management consultancy A.T. Kearney Inc. to grow 21% over the next five years, slightly higher than the global average. That has developers including DLF Ltd, India’s largest by market value, and Godrej Properties Ltd also jumping into online sales.
Not all developers are on board, however.
“I am not sure how successful online sales of apartments will be in the long run. It is a testing-waters kind of thing,” said N.M. Gattu, chief financial officer at DB Realty Ltd, which hasn’t started using e-commerce platforms. “This may complement the traditional sales mechanism. It cannot replace it.”
Delays in completing new developments continue to afflict sales, both online and off. Out of about 1.8 billion square feet of residential supply in India, 40% of homes were delayed beyond a year, with the most in Mumbai and the area around New Delhi, according to Liases Foras. In the end, confidence in the developer’s ability to deliver plays a role.
“Indians believe a lot more in what we can’t see like the concept of God and the things that follow,” said Rustomjee’s Irani. “So the sale of high-value apartments can pick up further in India as long as it comes from a reliable developer and good brand.” Bloomberg
[“source – livemint.com’]