The way to real(ty) profits!
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Nov, 07 2014

The way to real(ty) profits!

Of late, real estate industry has not produced the desired results due to market slowdown and there is despondency in the industry.

However, factors like the new government at the centre and somewhat stable market coupled with re-emergence of prominent real estate giants who are riding on the franchise bandwagon have once again raised the hopes of the dwindling market. Let's find out what the real estate's reality is…

The real estate industry here has been riding high since 2005 following central government's policy to allow Foreign Direct Investment (FDI) in this sector, which led to a huge boom in investment and development activities. Alongwith several new domestic realty players, many foreign real estate companies established their business here.

However, the booming industry was marred by the effects of the global economic slowdown in mid 2008. This led to a major drop in the FDI inflow into real estate and industry's downturn began to follow.  Though with new government at the centre and market somewhat stable, there is encouragement in the industry.

Notwithstanding the present scenario, real estate remains one of the fastest growing sectors of the Indian economy and contributes about five per cent to India's gross domestic product (GDP).

As per recent reports, the Indians living in urban areas will increase from the current 377 million to about 600 million by 2031 thus inviting huge construction. This will take the Indian construction market to more than double to USD649.5 billion by 2020 from USD360 billion in 2010.

According to Ministry of Housing and Urban Poverty Alleviation, RBI, CRISIL, Aranca Research Note, the urban housing shortage in urban India is pegged at 18.8 million in 2012 while in rural area it is estimated at 47.4 million. It has led to a significant increase in the real estate activity in cities like Indore, Raipur, Ahmedabad, Jaipur and other two-tier cities and has opened avenues of growth for the industry. Also, the increasing urban population (expected to cross 600 million by 2031) and growing household income are driving demand for residential real estate.    

Resurgent real estate franchising brands

Several major real estate franchise companies have made a sort of comeback into the Indian market. They had kind of taken a break or slowed down their operations in the past after foraying in India. Now, they have come back in a big way with hopes of major expansion in the country in the near future.     

Coldwell Banker, one of the oldest residential real estate franchise system of North America, is looking at opening its 100 franchises in India in the next three years. The company has a footprint in 49 countries, has 84,000 agents and 3100 offices worldwide.

Ramnik Chopra, Managing Director, Coldwell Banker India, states, “Coldwell Banker India is a part of the $ 5 billion Realogy Holding Corporation. Consumers within all segments from luxury to affordable, want excellence in services, which Coldwell Banker India endeavours to provide. With the support of one of the strongest real estate brands worldwide, Coldwell Banker India's mission is to exceed expectations and turn the franchisee's business into a powerhouse in the real estate market with a reputation for setting new standards of professionalism and innovation.”

Also, Century 21 Real Estate LLC, an American company, has forayed into India in a big way targeting about 400 franchises in the next five years. The brand is looking for pan-India expansion eyeing all major cities.

With over 7,100 independently-owned and operated franchisee broker offices in 77 countries and territories worldwide, Century 21 in affiliation with more than one lakh sales professionals continues its aggressive global expansion throughout Europe, North America, Latin America, the Middle East, Australia and Asia.

On this, Sandeep Singh Katiyar, CEO, Century 21 India, says, “Century 21 India will look at implementing international best practices and will create a new-age real estate brokerage experience for buyers and sellers throughout India. Considering the same, India has the potential to absorb up to 2500 real estate franchises in the next five years. Through its professional training and global presence, real estate agents can now take advantages of the vast Century 21 franchise network locally and globally.”

Another giant RE/MAX has been a successful phenomenon in around 90+ countries and has played a pioneering role in organising the unorganised real estate market in various countries. In India, RE/MAX plans to recruit and train real estate people at various levels of the business model. It has been successful in doing the same in around 45 cities in India.

Opportunities

After a brief lull, the experts say, the time is ripe for the investment in the industry. Especially those who want to take a franchise of a real estate brand they have a better chance as several of the leading brands have set their focus on India.

Chopra of Coldwell Banker says, “As leaders in the world of real estate franchising, Coldwell Banker India offers entrepreneurs an opportunity to leverage their professional equity to enter the thriving and dynamic business of real estate brokerage business. Coldwell Banker India is an extremely consumer and retail focused organisation, and would like to provide quality real estate brokerage services across India. Therefore, we understand that the only way to grow is by taking the franchising route.”

Coldwell Banker India is a master franchisee with exclusive rights to appoint franchisees, to develop and market the brand in the Indian sub-continent.

Katiyar of Century 21 too feels, “Real estate franchising has an immense untapped opportunity in India. Through our systems which have evolved through our global practice, we intend to organise the market of real estate sales in India. We will also establish a professional approach so as to enrich the real estate buying and selling experience here in India. Real estate brokerage is no longer a business bound by geographical limits. Century 21 India offers a global platform for real estate businesses and provides a great opportunity for networking to Century 21 franchisees across countries to do business globally.”

Challenges

Several challenges continue to dog the real estate industry, which has seen many ups and downs in the last few years. Inadequate source of finance, rising material and manpower cost, labour shortage, absence of clear land titles and procedural difficulties from government's end are among the major challenges witnessed by the sector.

Apart from this, International Monetary Fund's recent study on global housing prices says India has witnessed the steepest fall among 52 major markets. The calculation on the annual percentage change in property prices shows that prices in India fell by 9.1 per cent, the highest among major real estate markets.

On the same lines, property research firm Liases Foras study found there were about 7.6 lakh unsold apartments across India at the end of June. These are some disturbing news for the industry and is a wakeup call for all linked with it.

Conclusion  

In any business, there are both challenges and opportunities. Real estate is one business that may slow down for a while, but pays off sooner or later. And with many options to tap the market the organised way, one can take a franchise of any of the leading brand s to see the real business growth.

Franchise facts             Area        Investment        Expansion plans

Coldwell Banker India       700 sq ft   Rs 50-60 lakh      100 franchises in 3 years  

Century 21 India               NA           Rs 10-20 lakh      400 franchises in 5 years

RE/MAX                          500 sq ft   Rs 5-10 lakh        Pan-India

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