Real estate: The Web Tangle

WHATS IN A NAME?

Developers have their own unique web pages that host all their projects. They would not need to have unique sites for every project that they launch. This is where brokers,some authorised,some not,step in. Small brokers keep advertising and hosting web pages with similar sounding names as projects to get more hits. There needs to be a mechanism so that this practice can be stopped. Maybe there could be a registration of some sort that only particular brokers can advertise for a developer, says Sandeep Ghai,assistant director at property solutions company Investors Clinic.

Internet laws are yet to be imposed strictly in our country. There are instances of some brokers using a developers name on their site though they are not authorised to do so, says Sunil Dahiya,managing director of real estate developer Vigneshwara. This is something that the corporate affairs ministry needs to look at. We have registered our company8217;s name and no one else,a company or broker,can use it in the real estate category without our approval.

It is important to know where you are getting your information from. Developers need to update their websites at regular intervals. Buyers need to be able to get ready information from the appropriate source and builders need to ensure that, says Amrapali Group chairman Anil Kumar Sharma. We need to subscribe to search engines so that our web sites have better display. But brokers can always advertise through other platforms,we cannot stop them from doing that.

CHECK THE BROKER

There is an agency model,where developers sell properties through intermediaries,like brokers or agents. This is an established process that gives reach and volume to developers, says makaan.com chief operating officer Aditya Verma. Like in any other similar model,the agents in real estate work on a commission that is anywhere between 1-8 per cent of the cost of property. Higher commission is paid to agents that are able to generate significantly higher volume of business. Agents sometimes pass on part of their commission to home buyers as an incentive to buy through them. This is a perfectly legal practice and is being followed in many industries, he says.

However,some developers have already faced problems when unauthorised brokers attempt to sell their properties. When brokers try to play around with rates and quote something they aren8217;t authorised to do,the most we can do is blacklist them,says Supertech chairman and managing director R K Arora. Some brokers say that we allotted them these many properties to sell at this rate,and that is wrong. We are regularly keeping a check on it. We only give particular brokers right of sale,buyers need to also check if brokers are authorised to sell a particular developers property, he says.

We have sometimes faced problems of brokers quoting a lesser price or different floor space area,but we have taken steps to check it, says Amrapalis Sharma. As to the steps taken to minimise such malpractices,he says,Each broker is given a unique number for a particular property. If a buyer gives us that number we will be able to tell him the entire history of the property. Thus,we can check if a broker is quoting something else than what he is supposed to.

Investors Clinic,which hosts advertisements paid for by brokers,has also had its share of problems. There have been two cases in the recent past where we had to blacklist the brokers. They hadn8217;t signed a memorandum with us but were using our name, says Ghai. Earlier we took it lightly. But this time,the broker was quoting a lower price for a residential project and also using our name to make the sale. Luckily the buyer contacted us asking if the deal was okay. So we came in and blacklisted the broker. The other large deal was related to a commercial property where again the broker was using our name to make a sale.

DEVELOPERS DUTY

If developers take due care at the time of appointing of agents and if proper information dissemination takes place between the agents and developers,miscommunication can be minimised. However,there remain chances of brokers advertising misleading information. This is something that advertising portals hosting brokers promotions are not able to keep a check on. Ghai says,Our advertising department does keep a check on what finally goes on our web page,but practically speaking the checks are not foolproof.

Vineet Singh,business head at property portal 99acres.com says the responsibility lies with the developer to ensure that buyers get the correct information. If a broker advertises and the plans are different from the developer8217;s,the onus lies on the developer to keep a check on it. We are just an advertising platform and not liable for any such mistake. Brokers pay us money to advertise for specific projects which we put up on our web site. Developers need to check that brokers do not mislead buyers with faulty advertising, he says.

Explaining how advertising portals advertise projects,makaan.coms Verma says,Featured projection on our website can be used by both agents and developers. There are developers who prefer to reach out directly to the potential customers. These developers especially from south Indian states advertise directly on our websites. On the other hand there are developers who prefer to deal through agents especially true of developers in western and northern India. In these cases the advertisement comes through their agents.

PRE-LAUNCH NEXUS

The business of pre-launch sale of properties revolves around a link between developers and brokers. Some brokers are also involved in underwriting projects by forming joint ventures with developers on a revenue-sharing basis. The broker or estate agent is the most important link in the pre-launch business,especially on the Internet.

Developers and brokers are definitely working together. No broker advertises on our site or on the Internet if he is not engaged by the developer to do so, says 99acres.coms Singh. There are brokers who get to know the floor plans and price of a developers new project from the pre-launch stage. Even if the developer advertises the project but doesnt give specific details,the broker will. So they work together on this. There is definitely a possibility of underwriting as brokers may advertise for projects at lower prices, he says.

COVERING THEIR ASSETS

Some brokers are able to quote lower prices for properties as they promise the developer quicker sales by underwriting of property. Verma says,Underwriting is practiced by a few large agents. The agent underwrites large volume of units in a specific project of a developer. He takes the risk and promises to liquidate these units in a prescribed time. In return he gets higher commission and support from the developers. This phenomenon is new to the Indian market but can gain strength in a buoyant real estate market.

This becomes a problem for other property consultants as underwriting brokers are able to get more interest from customers. Underwriting definitely happens and it is a problem that our organisation faces, says Ghai of Investors Clinic. Developers hand over part of their projects to brokers who hold on to them. Certain brokers are just interested in getting the booking amount and will quote a lower price. A customer is drawn to them as they quote prices lesser than ours,so it is a problem.

Vigneshwaras Dahiya,explaining how some brokers are able to advertise projects at lower rates,says,There is a certain brokerage that the broker gets from the developer when he makes a sale. There are also customers who get a certain discount when they purchase directly from the developer. Some customers may want to sell their recently purchased properties,for which they turn to brokers. In these cases,brokers can sell at prices lower than what the developer is selling at to make a quick sale for the home seller.

Developers,however,paint a different picture. Underwriting is not happening now. Though,it was very popular around 2004-05,when prices used to increase not just in a month but even a fortnight. Developers used to try to underwrite properties then. But today,dealers have to sell to end users and not investors, says Amrapalis Sharma. Supertechs Arora says,There are obviously some players in the market who underwrite their properties. But most developers like us do not prefer that method. We analyse the market and predict future trends,only then do we calculate the rate and market the product.

CAVEAT EMPTOR

Ultimately,while one can point fingers for misleading advertisements,the decision lies with the buyer. Developers are quick to inform that buyers should contact them before making a purchase,even if it through an agent. Ultimately it is the right of the developer to sell directly or through agents. And unauthorised brokers can advertise via the global platform of the Internet.

There are a lot of web sites and agencies that deal with home buying,how can we restrict anyone? That doesn8217;t mean that we will not act if something is wrong, says Amrapalis Sharma. We state that these are just intermediaries who can work for anyone,not just us. If a buyer is not happy with his purchase in our projects through these people,he can tell us about it and we can do something.

There are marketing websites where developers and authorised agents advertise. When we sell properties in our projects,we advertise through brokers who will obviously also use the Internet, says Vigneshwaras Dahiya. There definitely needs to be a regulatory body so that brokers who have agreements with builders are registered. Till such time,buyers need to be careful and not be misled by deceptive advertising. Check up on brokers before being lured by cheaper rates. Its quite easy to get caught in the World Wide Web.