New realty law may put most brokers out of work
According to real estate agent body National Association of Realtors-India (NRA), around 75% of total brokers may close down business in the next three years as regulatory reform sweeps over the real estate market.business Updated: May 26, 2017 11:06 IST
A large number of property brokers in the country may shut shop while bigger brokerages would be forced to consolidate under the new realty law that aims to bring transparency and accountability to the real estate market, according to property advisers and brokers’ associations.
According to real estate agent body National Association of Realtors-India (NRA), around 75% of total brokers may close down business in the next three years as regulatory reform sweeps over the real estate market. Similarly, the Confederation of Real Estate Brokers Association of India (CREBAI) also predicted that almost 50% of local property agents may not exist as the sector becomes more competitive and compliances evolve.
“The new system will sieve out non-serious players (brokers). It will go down to just about half a million by 2020. There will also be a series of consolidation among brokerage firms. You have to either step up or step out because the market is becoming competitive,” said Sam Chopra, president, NRA-India. According to estimates by real estate brokerage firm RE/MAX India, around two million real estate agents currently operate across India.
Under the Real Estate (Regulation and Development) Act 2016 (RERA), which came into force on 1 May, all property brokers must register with regulators in their states. The law has also made them liable for any misinformation about the projects they sell or in case of default by developers they represent. They will have to pay a fine of up to 5% of the total property cost if they fail to comply with rules.
“Only serious brokers would register as there is a fee that needs to be paid. Secondly, maximum consolidation would happen once they discover that this is an onerous, responsible profession now,” said Anuj Puri, former chairman and country head of property consultant JLL India, who recently bought out the company’s residential business to start his own brokerage firm.
Puri, who is in the midst of recruiting staff for the venture, said many local brokers across the country have shown interest to be part of a larger platform.
“It has been tough for brokers to sustain themselves for the past two years because of the slowdown. Now, with RERA coming in, it will become more difficult because of the penal factor. Besides, RERA does not have any answer to problems faced by brokers. There is a good chance many people will exit the industry,” said Prakkash Rohira, a Mumbai-based real estate broker.
Vikram Mehta, president of CREBAI, agreed that while brokers have not been left out of the purview of RERA, the government has “not taken care to safeguard their interest”. He said stringent provisions under RERA may force around 50% of brokers to shut their real estate broking business.
“Faith in builders has decreased considerably in the past one-two years. Now, with RERA coming in, brokers will also be responsible for failure of not delivering on time. Why will I want to stick my neck out when we will be penalized for mischief of builders,” said Avinash Mordani, a real estate agent.
Brokerages, too, have been consolidating in the recent past. Apart from JLL India, which sold its housing business to focus on other new growth areas, Mumbai-based online realty portal firm Housing.com merged with News Corp.-backed PropTiger earlier this year. Last week, Faridabad-based Franchise India’s real estate unit BusinessEx.com announced the acquisition of a majority stake in RE/MAX India for around Rs100 crore.
Mint reported on 27 April Housing Development Finance Corp. Ltd (HDFC) is in talks with online classifieds firm Quikr India Pvt. Ltd to sell its brokerage business HDFC Realty and digital business HDFC Red in an-all stock deal.
Vikram Goel, chief executive officer of HDFC Realty Ltd, declined to comment on the deal but said the brokers’ community is headed for a major consolidation as they explore ways to work together. Recently, the firm also adopted a partnership model where it is looking to collaborate with local brokers to sell properties as part of its expansion plan. So far, around 7,000 real estate agents have registered. It plans to take it to 15,000 by year end. “We started this drive in anticipation that local brokers would want to align with someone who would educate and train them post the implementation of RERA. We have received a massive response so far,” he said.
PropTiger, meanwhile, is planning to cut down the number of developers it works with to about 75-100 from around 500 as part of its larger effort to stay compliant with new regulations. “We want to reduce the footprint. We want to be more meaningful to fewer developers who are compliant with new laws,” said Sunil Mishra, chief business officer, PropTiger.