Online home searches rise despite weak sales4 min read . Updated: 14 Jan 2013, 01:27 AM IST
Web portals, developers tweak business models amid millions of searches but few purchases
Mumbai: People are conducting millions of online searches for properties in India but few end up buying anything, prompting Internet portals, developers and housing finance companies to step up their efforts and tweak existing business models to convert such explorations into deals in a sluggish real estate market.
Data by Google Inc. for the September quarter showed that 40 million online property searches were conducted every month on average during the period. However, home sales have not kept pace with the rise in online searches.
Most buyers in Mumbai and Delhi-NCR (National Capital Region) are in the “wait and watch mode", according to Aditya Verma, chief operating officer and executive vice-president of Makaan.com, owned by People Interactive Pvt. Ltd.
He added the average search period—the time taken by a user to convert his or her search into a buy or sell action—increased from 5.4 months in 2011 to 7.2 months in 2012.
Yet the trend of increasing online searches holds a lot of promise with most searches conducted by people in the 28-36 age group with an annual income of 12-17 lakh per annum, according to industry estimates.
Web portals allow visitors to see actual photographs of properties, compare them with similar projects, track construction progress and also help with financial and legal aspects—all free of cost since they get their commission from developers once the property is sold.
The market for this transaction fee-based business is estimated at ₹ 30,000 crore, according to Samarjit Singh, managing director of India Homes.
Established names get a bigger share of the searches with firms such as India Homes, HDFC Realty, HDFC Red, Makaan, 99acres (owned by Info Edge (India) Ltd) getting around 4-4.5 million queries every month, according to the Google data cited above.
Most websites adopt either a newspaper or brokerage model. In the first, online ads are modelled on the lines of newspaper classifieds.
HDFC Realty, for instance, advertises its services on other websites such as HDFC Red and 99acres that follow this model. Property brokers and developers advertise properties on Web portals for a charge.
“There is more demand from property developers to advertise their projects on our website. But we only advertise properties which are approved by HDFC Ltd," said Amit Joshi, regional manager, west-commercial, at HDFC Realty, a unit of Housing Development Finance Corp., or HDFC.
According to the HDFC Realty website, the company executes transactions worth over ₹ 1,500 crore annually and has a client base of over 2 million.
Makaan.com charges ₹ 500-1,000 depending on the number of days and the kind of visibility the seller wants.
“Our website gets around 1.5-1.7 million visitors per month. Around 74% of them look to buy properties, the rest 26% look for rental housing," Verma said. “Sixty-five per cent of searches are looking for the affordable category with a price band below ₹ 60 lakh."
He added that around 82% of the property searches are from the metro cities—20-25% traffic from Mumbai; 16-17% from Delhi-NCR; 10-11% each from Bangalore, Hyderabad and Pune; and 6-8% each from Chennai, Ahmedabad and Kolkata.
In the brokerage model, once a homebuyer is registered with the website along with the budget and location requirements, a team guides the prospective buyer on what to buy.
This process includes site visits. The site also helps with documentation and closing the deal.
“We receive over 200,000 enquiries in a month and have been transacting properties worth ₹ 400-500 crore per month on an average for the last two years. Around 85% of the transactions are for properties in the middle-income range, which is below ₹ 1 crore," said Singh of India Homes, earlier known as Agni Property.
Most brokers that follow the brokerage model still consider face-to-face interaction with clients as the most important aspect of their business. But many small-time brokers also find merit in changing the way they do business.
“The trust between the broker and the buyer has increased because of the information updates we provide on the website," said Ramprasad Padhi, chief executive officer of Mumbai Properties. “People no longer walk on the street to find a realty broker. I tell other brokers to have at least a branded email of their company to survive in this business, or they will be wiped out in three-four years," he added.
“We started in 2008 with 54 developers; but now we have 2,000 developers. The advertising spends by these developers have increased 18-22% in 2012 compared with the previous year. Some of the developers who have never advertised online have started doing so," said Verma.
Developers such as DLF Ltd don’t advertise directly on property sites. Bangalore-based Sobha Developers Ltd subscribes to property portals, whereas Mumbai-based Sunteck Realty Ltd uses websites such as moneycontrol.com and yahoo.co.in to advertise.
Online searches are increasing, especially in the metros and big cities, amid the slowdown.
The Makaan.com Property Index (MPI), published by Makaan.com, showed that property prices in Delhi dropped 7.1% in the August-November period of 2012; Mumbai prices fell 3.8%.
“It became evident in 2012 that homes in Mumbai and Delhi-NCR are not selling at the current price points. It is extremely doubtful that the previously offered freebies and other such incentives will prove to be much of a sales booster for residential properties in the current environment," said Anuj Puri, chairman and country head, Jones Lang LaSalle India.