Market slowdown forces real estate brokers to look elsewhere

Market slowdown forces real estate brokers to look elsewhere
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First Published: Sun, Sep 07 2008. 11 11 PM IST

Unregulated sector: A file photo of Indirapuram in Ghaziabad, bordering New Delhi. In late 2007, sales of houses in the Capital’s suburbs fell by 40-50% due to a hike in home loan rates amid rising in
Unregulated sector: A file photo of Indirapuram in Ghaziabad, bordering New Delhi. In late 2007, sales of houses in the Capital’s suburbs fell by 40-50% due to a hike in home loan rates amid rising in
Updated: Mon, Sep 08 2008. 10 24 AM IST
New Delhi: Tilakram Sharma, a retired air force officer and a real estate broker from the Noida suburb of the Capital, is busy these days interviewing at construction companies.
Sharma, a mechanical engineer by training, is looking for a job in construction companies that do fabrication work his real estate brokerage business has considerably slowed these days.
“Last year, in a week we used to have 10 bookings but now it’s a big deal if we manage 10 bookings in a month,” confirms Arun Sharma, who jointly manages Gaur Consultant with his father.
Unregulated sector: A file photo of Indirapuram in Ghaziabad, bordering New Delhi. In late 2007, sales of houses in the Capital’s suburbs fell by 40-50% due to a hike in home loan rates amid rising inflation. Rajeev Dabral/Mint
Arun Sharma has been in the real estate brokerage business for about five years. “I do construction on a contract basis… My father was mainly handling the brokerage business,” he says. “Because of the slowdown I am concentrating on the construction business and my father is in talks with companies for a job.”
Gaur Consultants now deals mostly with rentals residential properties. “The rental business is doing well…so we are continuing with that aspect of the business,” says Arun Sharma.
Sharma is typical of many real estate agents in New Delhi who entered the business, attracted by quick profits, but have now either changed their profession or are looking at doing so.
The real estate agents’ profession in India is largely unregulated without an apex body to regulate it. There is no criteria for becoming a real estate agent and the industry does not have any standards in terms of service conditions or charges. Brokers also do not have any legal status as professionals.
Because of the unorganized nature of the industry, during the real estate boom many professionals from other industries, such as architects, chartered accountants and lawyers, came into the real estate brokerage business.
While many of them did well, the slump in the real estate market has forced some of them to go back to their old profession or look for new jobs.
For instance, Nalin Nagpal, a lawyer, came to New Delhi from his hometown Sonepat in 2005, to join his cousin’s real estate brokerage firm. In the firm, he was overseeing sale of properties and other legal aspects.
Looking at the profits in the real estate business, Nagpal decided to start his own brokerage firm in Faridabad, where many builders were buying land. “People were making a profit of Rs50,000-60,000 on an investment of Rs2-2.5 lakh within two-three months,” says Nagpal. “It was a really good business then.”
The business, however, did not work. In April 2006, Nagpal again started a brokerage firm called New Era Properties and Investments. This time, the business did well.
But towards the end of 2007, Nagpal’s business again got into trouble. In late 2007, sales of homes in New Delhi and its suburbs fell by 40-50% because of an increase in home loan rates amid rising inflation, which made it expensive for buyers to buy and finance homes.
“I invested Rs15-20 lakh in different real estate projects thinking that if one project did not do well, the other will,” says Nagpal. “However, in late 2007 the slowdown started and I could not sell any of the flats I had bought from developers.”
Brokers those days typically made money by buying houses from developers during the pre-launch stage of a project and selling the property for a profit after the project was launched. In the pre-launch stage, brokers bought the flat by paying the developer 10-12% of the cost of the flat. The flat was later sold to investors or end-users at a higher price. “The money I invested is still stuck in those projects because there are no buyers,” says Nagpal.
After a bad experience in the realty business, Nagpal decided to find a job. In April this year, Nagpal joined a real estate firm called V3S as an assistant legal executive. “I had no other option left and had to go looking for a job,” he says.
Such exits have eliminated non-serious players from the industry, says Devinder Gupta, chairman of Century 21, an international real estate firm. “There are ups and downs in any industry. Non-serious players get out when there is a downturn but serious players are doing good business.”
Varun Sharma’s is another instance of a property dealer who has left the business. He was an independent property dealer between 2005 and 2007 catering to high-end customers.
But, due to a slump in real estate, Sharma has quit the business and has joined Genpact Ltd, India’s biggest back-office services firm, as a process developer. “Market has really slowed down,” he says. “These days to be a property dealer you need to be a professional with the right qualifications.”
Deepak Kohli, director of Deep Realtors Pvt. Ltd agrees. “Real estate brokerage is a business where there is no constant income,” he says. “So, there will be weeding out of some brokers.”
According to Gupta of Century 21, almost 30% of real estate agents in New Delhi and its suburbs left the industry during the current slowdown.
Varun Sharma, however, hopes to join the property business once the slump is over. “I have an MBA and I am pursuing a chartered financial analyst course as well,” he says. “I hope to use these skills some day in the real estate business.”
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First Published: Sun, Sep 07 2008. 11 11 PM IST