As the leader of a real estate company, it is rewarding to observe that property purchasing action in India seems to be moving online quickly. Indian consumers are now not only researching properties online before buying, they are even making a further commitment by paying the booking amount. This seems to be the natural progression for buyers who are now younger, tech-savvy and are seeking information and transparency when dealing with developers. The evolution of online home buying today is not radically different from that of other categories of products and services. Like always, a demand and supply gap was bridged by a set of early movers and since then the category has been growing steadily.
If data from Google is anything to go by, every year, more than eight million people search for real estate information online in India. Before zeroing in on a project, the internet-savvy consumer's in-depth research includes details of the developer, location, cost etc. The volume of real estate-related queries is growing at the rate of 35% year-on-year, out of which about half the queries are made with the intent of a purchase. There has also been a jump in the number of real estate companies participating in the Google Online Shopping Festival (GOSF) since 2014. To add "properties" to the list of their offerings, the likes of Amazon and Snapdeal have entered into exclusive partnerships (see here, for example) with real estate companies. There's also data available on rising real estate enquiries through mobile searches.
Online home buying has the potential to grow into one of the top e-commerce categories.
The truth is: Online home buying has the potential to grow into one of the top e-commerce categories.
Brands matter more than ever
In the last couple of years, things have really changed in the real estate business. To track this evolution, let us go back in time. An average builder in 2009 did not consider the value of a strong brand in selling his homes. Hoardings and print ads for different developers looked pretty much the same and buyers struggled to understand what set one player apart from the other.
Cut to 2016, branded properties account for 50% of overall sales in the industry. * Even though the concept is fairly new to the Indian real estate market, the segment is growing as it is wooing the audience with factors such as comfort and luxury. This is a clear indicator that developers are getting savvier with branding to boost the value of their properties -- some tie up with lifestyle/hospitality brands, others with celebrities/personalities -- making their properties attractive for Indian home buyers especially in Mumbai, Pune, and Delhi-NCR.
Currently, there clearly exist two kinds of real estate brands in the market: some are pure play real estate companies and the rest are corporates who have interests in the business. From a buyer's perspective, dealing with established and trustworthy corporates has brought in much-needed standardization in quality and innovation. Today, players in both categories of brands are investing in smarter media plans, covering social media too. In fact, effective media planning with a focus on digital will be instrumental in brand discovery in online home buying.
The hybrid model of buying is here to stay
E-commerce has revolutionized categories such as BFSI, hospitality, apparel, among others in a short span of time. This is likely to be the natural progression for real estate as well, albeit in a unique way. The reason is simple: according to industry estimates, 85% transactions in real estate are processed as part of home loans. This means that gratification for both buyer and seller won't happen online entirely. Still the good news is that buyers are expressing interest in paying 10% or more of the booking amount of the property online.
[P]urchase inquiries triggered online have a conversion rate of 25-30%. Online inquiries also drastically reduce the entire process of negotiation.
Fortunately, the target group for players in online home buying is expanding from NRIs and people who are looking for a property in a different city, to just about anyone who wants to invest in real estate. It is therefore wise for companies to woo this internet-savvy buyer. When provided complete information on a project, such a buyer is willing to pay the booking amount online and later complete the rest of the transaction offline. Snapdeal's recent online real estate shopping festival was a step in the direction of winning over "fence-sitters" who wait for real estate prices to correct. Customers could choose from more than 100 properties from all across the country with prices ranging between ₹20 lakh and ₹5 crore. In this case, a buyer could get a maximum of 6-8% lower price than card rates. Once the buyer pays the booking amount, the transaction goes offline. This is the hybrid model in home buying that will increasingly be adopted and it is here to stay.
Experts say that the internet has improved marketing outreach tremendously. It has been an essential and highly effective part of most developers' overall marketing programme as the purchase inquiries triggered online have a conversion rate of 25-30%. Online inquiries also drastically reduce the entire process of negotiation. Real estate players can then focus on one-on-one relationships with their existing and prospective customers to assist in closing the deal. From a realtor's perspective, too, online sales and discounts help generate cash flows for the business.
To go online, be transparent
Transparency is core to the uptake of online home buying in India. The transparency involved in maintaining a sophisticated online presence has raised standards among developers, and in turn empowered buyers. Online buying is still in a nascent stage, but it is set to rise with the growth of the internet, more urban migration - all aided by the general ease with which people have taken to shopping online.
Once the buyer pays the booking amount, the transaction goes offline. This is the hybrid model in home buying that will increasingly be adopted...
While companies can boost the online buying space by investing in digital capabilities, it is equally important to qualify their credibility by opening up their processes to become more transparent in their dealings.
Interactive and responsive customer service and social media platforms, websites with 3D virtual tours are some of the ways that can also be leveraged to report the details of a company's ongoing and future projects.
Having said that, things are moving fast for good. With banks strengthening the security of their gateways, buyers are more open to the idea of carrying out high-value transactions online. This is especially ideal for buyers who engage in cross-city buying.
The potential of online home buying in India is immense. Future success rests on the ability of housing companies to keep customers' interests at the centre of all their plans.
* An overwhelming majority of recent buyers (86 percent versus 88 percent in 2014) still financed their purchase, despite above-normal activity from all-cash buyers likely pushing the percent share down. Younger buyers were more likely to finance, and the median down payment ranged from 6 percent for first-time buyers to 14 percent for repeat buyers. Almost half (45 percent) of first-time buyers in this year's survey said the mortgage application and approval process was much more or somewhat more difficult than expected. According to NAR Annual Buyer & Seller Survey 2015.