Discounts through real estate group buys

In ‘group buying’, buyers join hands to get discounts from sellers on products and services. Many portals facilitate such deals by bringing together buyers into groups and tying up with sellers of various hues – restaurants, apparel vendors, gadget retailers. But ‘group buying’ need not be restricted to small-ticket items. It is also possible on real estate purchases – the largest investment for many people in their lifetime. Portals such as groffr, discountedflats, groupbookings and grouphomebuyers help potential home buyers in many Indian cities form groups and get discounts from builders.

The concept is based on a simple premise that a group has more negotiating power than an individual. When you buy as a group, you can drive a harder bargain and get a better deal. The seller may not mind, since what he loses as margin, he makes up in volumes, without investing much time, effort and money to sell his wares.

In real estate, group buying can benefit both home buyers and builders. With real estate in many Indian cities, especially in the metros being very costly, even a 1 per cent discount, if genuine, can translate into a tidy sum. A big discount could save you lakhs. Also, many builders may be willing to participate in such group deals, since they may want to sell their inventory quickly to get much needed cash. Especially in a market in which buyers are shying away due to high cost and many builders are saddled with high debt and inventory.

Two models

Broadly, there are two models of group buying in real estate offered by portals. One, through pre-negotiated deals in which the portal negotiates a discount deal with the builder in advance. It then invites buyers with an interest in the project to form a group of a specified size to avail itself of the offer. In the other model, buyers interested in a particular project listed on the portal join to form a group of a certain minimum size. The portal then initiates discount negotiations with the builder. In both these models, there may be time limits within which the buyer groups have to be formed. Else, the portal could withdraw the offer. Buyers usually do not have to pay for the service offered by the portals which charges builders fees or brokerage based on the sales. Portals usually also organise site visits and provide documentation-related help.

The group buying portals claim that discounts can be significant for the buyer – between 5 and 20 per cent, and even up to 30 per cent in some cases. But note that the quantum of discount may depend upon the stage of completion of the project, and the urgency of the builder to sell quickly. Many group buying deals in real estate may be offered in the pre-launch stage of projects where discounts may be more but the risks are higher for the buyer. As construction commences and the project nears completion, discounts would likely reduce.

Check-points

While group buying could help you get good discounts on your home purchase, exercise caution before you sign in. Check whether the discounts being offered are genuine, based on the prevailing market rates for similar projects in the locality. If builders inflate the listed price for the project and then offer healthy discounts, it may not make sense going for the deal. It is possible that in group buying deals, buyers have to make a higher down payment than in other deals. Check the details and assess whether you are comfortable with this.

If buying in a group comes at the cost of flexibility in choosing the house and its specifics, you will have to assess if the trade-off is worthwhile based on your objectives - whether you are buying to live in the house or use it for investment purpose. The time-bound nature of deals posted on group portals may mean that if enough buyers don’t join the group within the specified period, the discount deal may not materialise.

In the meanwhile, you could lose out on other good projects. Make sure to enquire about the track record of both the builder and the group buying portal. Do not compromise on document checks and other necessary safeguards before buying the property. Check whether you have the flexibility to back off in case you are not satisfied. The lure of a discount should not result in your becoming penny wise and pound foolish.

> Anand.k@thehindu.co.in