Virtual reality of online property deals

Ashwinder Raj Singh

The Internet has indeed changed human life for good, and the process is far from over. At this point in time, is impossible to anticipate in how many ways it will make our lives even more interesting, fruitful and productive.

One of the most important domains that the internet has impacted is the business world. Internet marketing has become by far the most effective channel to drive consumption, challenging every other known route of grabbing the attention of buyers. Obviously, the real estate sector could not lag in the race to harness the power of the internet.

However, despite its indubitable powers, the internet has not become the magic pill for real estate developers and marketers.

How the internet works in real estate marketing

Some of the most important advantages it offers are:

• It provides access to a massive potential clientele.
• It is by far the most cost-effective real estate marketing tool.
• It allows developers and brokers to communicate faster and more efficiently with prospective buyers. A lot of the information pertinent to a project can be posted online, and inquiries originating from the builder’s website or via online listings can be immediately attended to via email and online chats

More recently, developers have actually begun to sell homes online. With the help of three-dimensional imagery and virtual tours, they are attempting to interest buyers and persuade them to purchase homes online. By doing so, they are labouring under the assumption that real estate buyers will respond to the same impulse triggers that persuade them to buy consumer durables online.

Shortcomings

On the surface, this approach to selling and buying real estate seems novel and even logical. What works against it is the manner in which the real estate market actually functions in India.

A house is a brick-and-mortar structure that sells at a very high cost. In fact, a home is by far the most cost-intensive investment that most Indians will ever make in their lifetime. As such, a property purchase commitment is not one they will make with the same confidence and detachment with which they would buy a smaller commodity online. Secondly, buying a home is all about forming a personal bond with the chosen property. The home-buying process invariably involves personal inspection of a number of options at close quarters. Each option is examined from various perspectives, including:

• Affordability
• Viability of the location
• Construction quality
• Legal sanctity of the project
• Appropriateness of the facilities and amenities available in the project
• Reputation and reliability of the developer
• Appreciation potential

In making the final choice at the end of a prolonged selection process, the buyer effectively accords it the highest distinction among all other personally inspected options. The likelihood of a homebuyer making such a decision based solely on virtual information is on par with that of an art connoisseur buying a Rembrandt in an online auction.

Thus, a virtual representation of a property as a means to sell it online fails on several counts:

• It is impossible to understand the real value proposition
• It is impossible to create an emotional bond between the buyer and the property
• It is impossible to bargain with the developer - and this is a privilege which every property buyer, regardless of financial strength, expects
• Developers are not perceived to be among the most transparent and trustworthy sellers
• The ticket sizes involved in property purchase are too high for deals to be confidently concluded online

The ‘Real’ Facts

Developer’s Perspective: From the viewpoint of a developer, selling a property directly to a buyer via the internet is a means to cut on the costs of brokers and channel partners, marketing collaterals and OOH advertising, and also the cost of maintaining a large sales force. However, this perception does not acknowledge certain immutable market facts:

• Brokers and channel partners do business by virtue of their market knowledge, ability to convince buyer and many other ways in which they can connect the various dots along the bridge between developers and potential buyers. Importantly, they also provide buyers with the assurance that the legal aspects of property purchase will be taken care of
• A strong sales force is at all times required to transform direct inquiries into purchase decisions
• OOH advertising and attractive marketing collaterals not only speak for the project, but also for the strength of the developer's brand and market standing.

As such, none of these elements involved in successfully marketing a project can be dispensed with. The Internet is at best yet another tool to generate leads — albeit a very strong one. While the sale process can certainly be initiated online, a deal will always be closed in the real world, offline.

Broker’s Perspective: From a broker’s perspective, the internet is not a threat but a helpful resource. While a broker will be very familiar with his area of operation and also have valuable personal contacts, the Internet can make these bonds even stronger. With emails, a broker can stay in constant touch with his clients, provide them with regular updates about projects and deals, and complete the paperwork involved in property purchase. The consensus among real estate brokers is that the internet is an unmitigated blessing, and no threat at all to their business.

Times are changing, and the way the real estate business functions will also change. However, certain ground rules that guide how real estate is sold and bought will not change. Real estate is a people business across its entire spectrum. Just as social media cannot replace a healthy social life, but certainly aid it, the internet can never become a standalone real estate business solution — but is certainly a valuable adjunct to it.

— The writer is CEO - Residential Services, JLL India