Portals are taking over from real estate agents

A real estate ‘consultant’ with more than two decades of experience, K. Premsundar is a worried man. His business, a letting agency for low-end properties, has seen a big drop in the last two years. He says his clients have left him, choosing to place advertisements directly on the many real estate Internet portals and in neighbourhood dailies. Such advertising costs a fraction of the fee that agents charge.

Indiaproperties.com, an online real estate portal, allows owners to post their properties for Rs500 per listing, whereas if the deal is done through a broker, it would mean a month’s rent as commission, from either the owner or the tenant. Others sites such as magicbricks.com and Sulekha.com also offer similar services. The portals allow for direct interaction between the property’s owner or seller and a prospective tenant or buyer.

“Online portals have impacted agents’ business especially in the lower range. Their traditional clients have moved away,”said J. Sohail Sarooshi, vice-president of the Chennai Real Estate Agents Association. The association, which has 60 members, was formed as an attempt to bring standardized and fair conduct norms into the industry, which is largely unregulated. For a sale, agents get a 3-4% commission on the value of the sale, and for a rental deal, they get 15 -30 days’ rent as commission.

“Real estate agents have so far thrived on information,” said Naresh Malkani, chief executive officer of indiaproperties.com. “Now, the Internet provides the information.”
However, he said unlike booking travel tickets online, the “Internet is not going to replace agents, as the transaction has to be done physically”. Agents now need to focus on services such as valuation, documentation, registration and field visits, he said.

“We definitely have seen the advanced Internet user take advantage of the free online classifieds platform as an additional option. By interacting directly with other individuals, they have able to reduce lead time and costs”, said Satya Prabhakar, chief executive officer of Sulekha.com, a portal that also lists properties. “It still may be a good idea to supplement this with the professional advice of local real estate agents”.

According to an estimate by indiaproperties.com, in cities covered by online portals, 40% of the total market, in terms of property inventory, is listed on Internet sites. In the last six months alone, Malkani said, there has been a 120% increase in listings. And, property for a monthly rent of between Rs5,000 and Rs20,000, the traditional bread and butter for letting agents, constitutes one-third of total listings on his website.

On Sulekha.com, Prabhakar said 80% of rentals are at Rs20,000 per month or below. Both individuals and real estate agents access the site.
Over the next few years, this percentage will increase, as new and young property buyers of the last five years would be in the market to sell or rent. Traditionally, it takes about 7-8 years for change in ownership or usage.

Though the Internet is posing a challenge to agents, Sarooshi and Malkani agreed that both could co-exist. Agents, who pay an annual fee of Rs10,000 to enrol as members, can list 100 properties every year, and provide one-fourth of all listings on indiaproperties.com.

Local real estate agents, especially smaller ones, Prabhakar said, are using online classifieds as a “platform to reach out to individuals who are looking for rental solutions in the niche areas that they operate in. The lower entry barriers and flexible advertising options have helped those who have been quick to adopt this.”

However, Premsundar, in his late fifties, has never used the computer nor browsed the Internet. He says he is too old to start now.