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DESIGN PROJECT - II (SYSTEM DESIGN) REAL ESTATE BROKARAGE SYSTEM IN INDIA BY Kunal Prabhakar Dewalwar (SDM-2012 Batch)
Under the guidance of Prof. Shrinivasarao Pattur
NATIONAL INSTITUTE OF DESIGN P.G.CAMPUS, GANDHINAGAR, GUJARAT i
CERTIFICATE
ii
vague ideas & concepts. His encouragement & helpful
ACKNOWLEDGEMENT:
attitude, when I needed them most, inspired me to No good work can be completed without the
undertake this work. I would like to thank Prof.
guidance of well worth teachers. To complete this
Shashank Mehta, Prof. Jignesh Khakhar and Prof.
project work I had the pleasure of being advised by
Gayatri Menon for their helpful suggestions and
many eminent personalities. I wish to convey deep
guidance throughout the project.
sense of gratitude to all of them.
I would like to extend my sincere thanks to
In the completion of this project, I am most
Miss. Priti Bhujbal who helped me as a city planner in
indebted to my course coordinator Mr. Bhavin Kothari
this project. Inputs and information given by her was
as well as the project guide Prof. Srinivasarao Pattur for
very helpful for me to study the system in-depth.
his
expertise
&
highly
valuable
guidance.
Prof.
Shrinivasarao’s personal supervision of my research work & his keen interest in it was always a source of inspiration to me. He gave a meaningful though to my
Finally, my special thanks to all my SDM friends without whose support; I could not have completed this project work.
3
INDEX1) TITEL PAGE …………………………………………………………………………………………….…………......……………….I 2) CIRTIFICATE………………………………………………………………………………….………………………….……………..II 3) ACKNOWLEDGEMENT …………………………………………………………………...…………………………………………….III 4) INDEX………………………………………………………………………………………………………………………………..…..IV 5) SYNOPSIS…………………………………………………………………………………………………………………………………1 i. ii. iii. iv.
Aim………………………………………………………………………………………………………………………………….1 Objective………………………………………………………………………………………………………………………….1 Scope and limitations…………………………………………………………………………………………………………1 Methodology…………………………………………………………………………………………………………………..…1
6) REASONS FOR SELECTING THE TOPIC…………………………………………………………………………………………2 i. Facts about broker system………………………………………………………………………………………………….2 7) INTRODUCTION…………………………………………………………………………………………………………………………3 i. A Career in Real Estate Brokerage – An Indian Perspective………………………………………………………3 8) REPORT FLOW DIAGRAME………………………………………………………………………………………………………….6 9) STATISTICS…………………………………………………………………………………………………………………………….7 10)PROCESS FOLLOWED BY THE MIGRANTS TO GET RENTAL HOUSE…………..………………………………….8 11) SELLING PROCESS…………………………………………………………………………………………………………………..9 12) SELLING PROCESS FLOW DIAGRAME……………………………………………………………………………………..…15 iv
13) SYSTEM COMPONENTS…………………………………………………………………………………………………………...16 14) SYSTEM MAPPING…………………………………………………………………………………………………………………17 15) COMPONENTS RELATIONSHIP AND INTERACTIONS…………………………………………………………………….21 16) PROBLEM IDENTIFICATION……………………………………………………………………………………………………..23 i. Primary Research (Tenants)………………………………………………………………………………………………23 ii. Primary research (Brokers and Agents)……………………………………………………………………………….25 17) SECONDRY RESEARCH……………………………………………………………………………………………………………27 i. Transparency in real estate begins with the broker……………………………………………………………..27 ii. Keeping norms in place: agents need to be governed……………………………………………………………28 18) PROBLEM AREA……………………………………………………………………………………………………………………..33 19) CHALLENGES IN IMPROVING THE BROKER SYSTEM…………………………………………………………………..35 20) CONCEPTS AND SOLUTIONS…………………………………………………………………………………………………….36 21) IDEA DVELOPMENT………………………………………………………………………………………………………………..42 i. Concept…………………………………………………………………………………………………………………………43 ii. Key features of the service……………………………………………………………………………………………….44 22) BUSINESS MODEL CANVAS……………………………………………………………………………………………………….45 23) SYSTEM IMPROVEMENTS…………………………………………………………………………………………………………49 24) REFERENCES………………………………………………………………………………………………………………………….50
v
SYNOPSIS-
AIM: Project aim is to design and develop such a system which will be more convenient for the tenants and property buyers. OBJECTIVE: 1. To find out gaps, bottlenecks in existing real estate brokerage system. 2. To study and find out what tenants and property buyers and sellers want in this system. 3. To identify problems and their levels of execution 4. To find out various way to deal with problems 5. To design a system which will save a user from being cheated by agents and brokers 6. To create a user centric system SCOPE AND LIMITATIONS:
Real estate broker system has been working as unorganized system and it is very difficult to make change in it. It has no governing committee to force them work according to a designed system.
It has been a rigid system as it is working on its own principles till now. People have no option to go against the brokers or negotiate as they have a power of having property options. It has become a source of easy money to the brokers once they have good contacts. METHODOLOGY: As a primary study, best way to understand this system was to be in the system and deal with various components of it. Fortunately, I had a chance to see the system and analyze it while searching for a flat to stay with my friend. I tried to talk with few real estate agents as well as brokers to get to know how their system works. I tried to talk with the tenants who has been through this system process and tried to understand what problems they faced. To have a larger perspective of the system I tried to explore it through secondary study in which I went through many newspaper articles, clients’ problems, user experiences, real estate bill.
1 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
REASON FOR SELECTING THE TOPIC “REAL ESATE BROKERAGE SYSTEM” With the real estate business booming in most parts of the country, the real estate sector has been widely recognized to an increasing purchasing power, customer friendly banks and home financing solutions. This growth in the real estate is now being connected to the people through advertisement, Real estate agents and Brokers. Till now Broker system of this business is struggling to be convenient for the property buyers as it has many layers and steps.
Brokers are connected with each other through network. In India many brokers work without any legal license and do most of the work with their contacts. There is no platform available for the tenants to complain about the Broker for his ill services.
My aim is to design and develop such a system which will be more convenient for the tenants and property buyers. I approach would be to make it more transparent through which tenant will be assured of the services which any broker will provide to him.
FACTS OF BROKER SYSTEM
Real estate property broker is a widely spread network across many cities. It has four major elements i.e. Agents, Property owners, Brokers and Tenant/ Property buyer. Real estate Main job is to have options of property to choose from for any buyer or tenant. 2 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
INTRODUCTION
This is unlike the USA, where a license is mandatory for
Real Estate Brokerage has two different faces on two different sides of the globe. While it is a dignified, white-collar profession in the west, it is yet to progress beyond a blue-collar image in the Indian mindset. Indeed why so? Real estate brokers have made themselves infamous as middlemen, charging hefty commissions for merely connecting the buyer and the seller, and disappearing once the money is received. Many
have
a
rustic
background,
working
as
shopkeepers, delivery boys, watchmen looking to make a fast buck in India’s growing cities. Client experience has largely been negative, with people often sulking over the need to run from pillar to post for completing formalities without an iota of assistance from the Estate Agents.
anyone wanting to open an Estate Agency. The absence of regulation of has resulted in the proliferation of flyby-night operators with a get-rich-quick mentality. Consequently, consumer perception of brokers as middlemen and over chargers has solidified. However, times are now changing. Just as Organized Retail took the consumer retail sector by storm, organized real estate brokerage is quietly setting shop here.
Global
real
estate
networks
like
RE/MAX,
Caldwell Bankers and Century 21 are eyeing an Indian Presence. RE/MAX has associated itself with over 140 Estate Agents in India. Companies like RE/MAX have extensive self-regulation mechanisms prescribed for their agents, who operate as franchisees of the parent company, RE/MAX USA. Thus, while Government
A Career in Real Estate Brokerage – An Indian Perspective
regulation is yet to establish a foothold, such private initiatives are already in operation, taking the first few steps towards restoring the tarnished image of the
This rot has occurred largely because real estate
industry.
brokerage is unregulated. In India, anyone without any experience or training can become and Estate Agent. 3 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
Indeed, white-collar professionals can consider Real
Law and Construction Management in collaboration
Estate as a career option in the near future, within
with
three or five years. Self regulation, as in the case of
Hyderabad. It is a one-year long postgraduate course
companies like RE/MAX and industry associations like
with responsibility divided between the two institutions.
NAR (National Association of Realtors) is gradually
While the subject of Construction Management, being a
intensifying, with the setting of strict service quality
technical one, will be handled by the National Academy
standards and laying down of severe penalties like fine
of Construction, NALSAR will impart instruction in Real
and expulsion from the association in the event of any
Estate Law. Attending this course is advisable for
malpractice
industry specialists such as civil engineers, project
the
National
Academy
of
Construction
at
managers and realtors. Law is a key component of any In addition, the advent of property listing sites
real estate project. Indeed, as the saying goes, with a
exclusively for brokers can provide a fillip to white
good architect and a smart lawyer, a builder’s project is
collared
guaranteed to shine!
real
estate
professionals.
like www.propertyfeast.com are
the
The Annual Convention of the National Association of
sense that they only accept listings from agents, not
Realtors held at Hyderabad drew thousands of industry
from individual property owners. If this model clicks,
professionals from all over the country. There was a
then
uniform conviction among everyone that the industry
routing
of
new
revolutionary
Sites
property
listings
in
through
brokerages will increase, making the sector more
needed
lucrative.
desirable, provided that the regulation does not become
Moreover, renowned universities are now entering the
excessive red tape. The speakers came from diverse
fray with specialized courses in Real Estate and
backgrounds as builders, brokers, financial analysts
Construction Management. NALSAR University of Law
and even spiritual gurus. Mr. Lalit Kumar Jain,
at Hyderabad is coming up with a course on Real Estate
president of CREDAI, the nationwide association of
reform.
Government
regulation
would
be
4 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
developers, called for more institutions to offer quality
property is akin to a lawyer advising his client or a
training in real estate to budding professionals. There
doctor treating his patient. If you win your clients trust,
was a unanimous consensus that the brokerage
then more referrals will follow, ensuring good customer
business needed to become more customer centric.
confidence and repeat business for years to come.
Given the increasing strength of advocacy for reform, it is a matter of time before organized real estate brokerages offering host of value added services such as drafting of agreements, registration of documents, skillful negotiation of deals and advising developers on projects come to dominate the Indian reality scene. The financial rewards are huge, considering the high population density and the growing pressure on land, which is a limited commodity. It is beyond the capacity of blue collared workers to offer such services. Indeed the time is ripe for university graduates with training in property management and law to consider entering this industry. Buying a house is one of the biggest decisions a person makes in life. Mature advice from a seasoned professional is a must for such an investment to yield returns and provide happiness to the household. A good property
agent
almost
maintains
a
fiduciary
relationship with his client – a relationship built based on trust and confidence. Helping a person purchase 5 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
REPORT FLOW DIAGRAME-
6 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
STATISTICS
NSSO –35% urban lives in rented homes 35 million migrants in 90s to cities o 30% of urban population is migrants o 35% of urban families live in rental housing o Migrants stay in hostels, rooms, rental housing
Census 2011: 27.55% of urban population lives in rented homes o 21.7 million (mn) households (HHs) out of 78.9 mn urban HHs live in rented homes o 27 million urban HHs live in <1 room Rental Housing in Million+ Cities o 4 cities: >50% in rental with Bangalore at 60% o 6 cities: > 40% of population in rental
7 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
PROCESS FOLLOWED BY THE MIGRANTS TO GET RENTAL HOUSEAs per the statistics there are 35 million migrants in the 90 cities of the India. These migrants shift to other cities for the educational purpose or for the carrier purpose. Most of the times these people are new in the city and they donâ&#x20AC;&#x2122;t know about the city and it
becomes
difficult
for
them
to
search
for
the
accommodation. To make this situation less complicated there are few websites are available for the people like
These websites are useful to the people who are well
magicbricks.com and 99acres.com which provides the
educated and can access the internet.
list of available options of the rental houses and the property buying and selling options.
There is a majority of crowed who can not avail the services provided by these websites as they donâ&#x20AC;&#x2122;t have knowledge of latest technology. These type of people
prefer
to
browse
through
news
paper
advertisements or the posters available o the street by the brokers.
8 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
3. 4. 5. 6.
Company Partnership firm Proprietary firm Co-operative housing society
Using an estate agent or selling the property yourself
SELLING PROCESS Who is a seller? A seller is any person who sells or agrees to sell property for a consideration paid or promised to be paid or part-paid or part-promised to be paid. A seller should be competent to enter into a contract and make the sale. She must be legally entitled and must have the right to transfer the property to the buyer. Any of the following persons can be a seller: 1. Individual 2. Builder/ Promoter
If you wish to sell your property you can find a buyer yourself or use an estate agent. Before making a decision you should consider how much each method would cost and how much time you have available. If you use an estate agent, it will be more expensive but the estate agent will take responsibility for advertising, showing potential buyers round, and negotiating a price for the house. If you wish to find a buyer yourself, it will be cheaper but you will need the time to make all these arrangements and deal with any problems. Finding a buyer yourself What price to ask If you wish to find a buyer yourself, you must first decide what price you want to ask for the property. Many estate agents do free valuations so it is always possible to arrange for two or more local estate agents 9
SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
to provide this information. If you want a formal valuation, you could arrange for an estate agent to provide this but you would have to pay a fee. In addition, you can find out about the cost of houses locally by looking at local papers, estate agentsâ&#x20AC;&#x2122; windows and similar houses in the area. Before deciding on a price, you may wish to consider:1. doing any repairs or decorating if this would make it easier to sell the house 2. arranging for a survey if you think there are any major problems that might affect the value of the house, for example, a roof in a bad state of repair. There are some items that you must sell as part of the house unless you make it clear to the buyer that such items are not included in the sale. These are known as fixtures and include such items as fireplaces and a central A.C. system. However, in some cases it is not always clear whether something is a fixture or fitting so it would be useful for you to draw up a list of any items you intend to remove or are prepared to sell to avoid problems later.
It is normal practice for a potential buyer to offer a lower price for the house than the seller is asking. You might therefore want to allow for this by setting your price a little higher than the amount you would like to get. Advertising the house You should first of all find out how much the local papers charge for house advertisements and then draft the advertisement on the basis of how much you want to spend. You could use existing advertisements as a guide to the format and wording. It is also possible to advertise very cheaply in shop windows. It is advisable for you not to give the address but to provide a telephone number instead. Finally you could consider drawing up details of the house in a similar way to that of an estate agent, for example, giving details of room sizes, local facilities and fixtures and fittings. These details can then be given to potential buyers, either before they call, or at the time they view. You could also consider advertising the property on the internet.
10 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
If you wish to use an estate agent If you wish to use an estate agent, you should find out about local estate agents and find out the following information:1. what type of property the estate agent specialises in 2. how much the estate agent will charge
value the house. It is also advisable for you to check the price that the estate agent suggests by comparing it to similar houses in the local paper. The estate agent will prepare details of the house to send out to people who are interested in buying it. These details will include the number and size of the rooms and all the fixtures and fittings which will be left in the house. The estate agent also arranges for the property to be advertised.
Estate agents charges Deciding who to sell to 1. Nearly all estate agents calculate their fees as a percentage of the final selling price of the property, usually between 1½ - 2½%. This is known as the rate of commission. If you decide to use an estate agent, the estate agent must confirm the charges and rate of commission that will be made. The estate agent must do this when they agree to act for you. What does the estate agent do The estate agent first of all visits the house in order to value it and decide on an asking price with you. You may wish to ask more than one estate agent to call and
Whether you have arranged to sell the house yourself or you have used an estate agent you may find that you receive more than one offer for the house. You can sell the house to whoever you want and do not have to sell to the buyer who offers the most money. You may wish to take into account whether the buyer:1. is a first time buyer 2. has found a buyer for their own property. If so, is it part of a chain of buying and selling and how long is the chain 3. is paying cash or is likely to get a mortgage 4. wants to move at the same time as you.
11 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
If you are using an estate agent, it is often easier for the estate agent to find out this information from the buyer. Deciding on the price at which to sell If you are using an estate agent, the agent negotiates with the potential buyer(s) about the price. The estate agent should try and obtain the best possible price for you. If you are acting alone, you must negotiate yourself. You do not have to accept the first offer put to you and should not be rushed into making a decision quickly.
Choosing who is to do the legal work (conveyancing) When you have accepted an offer you, or the estate agent, needs to inform whoever is doing the legal work. You can do it yourself or through Advocate. Using a Advocate Most firms of Advocates offer a conveyancing service. Although all Advocates can legally do conveyancing, it is advisable to choose a Advocate who has experience of this work.
Accepting the offer
Document Procurement
Even if you have accepted an offer, there is nothing in law to prevent you from changing your mind and accepting a higher offer from someone else. You should also bear in mind that when an offer is made and accepted the potential buyer can also withdraw, for example, they may not get a mortgage, or the survey may show up some structural problem.
Property papers like Khata, Khata Extract, Encumbrance Certificate, latest Tax Paid Receipts, etc. that are required by the buyer for the closure of the property transaction, in the event that these are not available with you. Cost of procurement of such documents shall be charged extra. Registration & Execution of Sale Deed
If you are selling yourself it may be a good idea to keep the names and addresses of all potential buyers who make offers, in case the one you accept falls through.
At the time of registration, sale proceeds will be collected from the buyer in the form of demand draft or other instrument as mutually agreed between the 12
SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
parties. On registration, the sale proceeds will be collected and deposited into your account.
Various steps involved in sale deed registration process:
PROCESS:
Sale deed registration process differs from state to state within the country. Following are the few common steps that are followed at the time of sale deed registration
Document Procurement Procurement of property papers like Khata, Khata Extract, Encumbrance Certificate, latest Tax Paid Receipts, etc. that are required by the buyer for the closure of the property transaction, in the event that these are not available with you. Registration & Execution of Sale Deed Execute the sale deed on your behalf at the subregistrarâ&#x20AC;&#x2122;s office on the designated day and complete the transaction. At the time of registration, sale proceeds will be collected from the buyer in the form of demand draft or other instrument as mutually agreed between the parties. On registration, the sale proceeds will be collected and deposited into your account.
1. Convenient date for registration will be fixed after checking with the Seller / POA holder (in case if it is issued) and the Buyer. 2. Coordination with the sub-registrar office in terms of the documentation requirement for registration and intimation of the same to the Seller / POA Holder and the Buyer 3. Registration time will also be checked and intimated to the Seller / POA Holder and the Buyer. 4. Registration charges like stamp duty, service tax, etc will have to be borne by the buyer and it has to be paid to the subregistrar office at the time of registration. Mode of payment will be discussed and the payments will be settled by the Buyer to the Seller / POA Holder at the time of registration.
13 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
The above details are provided for the purpose of reference only. The process & requirements for registration are subjected to change in government policies. The checklist for selling property is as follows: 1. Finalizing the terms and conditions of the deed 2. Providing the duration for compliance of various terms and conditions mentioned in the contract; 3. Procuring the consent, permission, sanction, no objection certificate of the society, if applicable 4. the income tax authority if applicable 5. the Urban Land Ceiling authorities if applicable 6. the Municipality if applicable
7. any other authority, if applicable 8. Getting it stamped by paying applicable stamp duty 9. Not handing over the title deeds and possession until the payment of consideration. 10. Engrossing the Deed 11. Registering the Deed
14 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
SELLING PROCESS FLOW DIAGRAME-
15 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
A person or group that legally owns the land, a house or an office etc.
SYSTEM COMPONENTS-
5. Legal advisorA lawyer who gives advice and helps preparing the legal paperwork for the property.
There are 5 main components of this system as follows1. Real Estate BrokersThese are the middlemen who facilitate selling and buying of immovable properties in form of land, building, shopping center, market, factory site etc.
Apart from these 5 components system has many components as in case of paying guest facility furniture manufacture, laundry service, transportation, and other brokers in the network, newspaper agency , printing press etc. all these components can be seen in detail in system mapping.
2. Real Estate AgentsA person who collects the documents from the broker and help doing the legal work with help of legal advisor. 3. TenantsA person or group that rents and occupies land, a hous e, an office, or the like, from another for a period of time; lessee. 4. Property owner-
16 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
SYSTEM MAPPING-
As I was in the system, I tried to understand the process of work done by the broker and I tried to map it out in three stages. In each stage I tried to expand the system as per the services and duties done by the broker.
owner. In this process he will be get paid from the owner as well as the tenant as part of his commission.
While choosing a property or at the time of giving it on rent both the tenant and owner has few expectations like for the tenant it is important to have good property in terms and location and condition as well as assurance of a good owner and well documented agreements. There are few expectations are from owner as well as good agreements, advance money and assurance of a good tenant. To fulfill their needs and expectations they decide to go through a system of brokers who try to meet appropriate tenants with the
17 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
18 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
19 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
20 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
COMPONENT RELATIONSHIP AND INTERACTION-
After mapping all the possible components of the system it was necessary to understand their relationship among each others. I have tried to divide all these components in three layers as per their relationships and importance as components. First layer of component have tenants, property owners, agents and property brokers. In India there is a very thin line between property agents and brokers. Here many agents have their offices and they have a team of brokers to have multiple options of the properties. These brokers may work as individual as well. If any client comes through the agent to the broker and he finalizes the property broker has to give some amount of share to the agent. Once the deal is done it’s a job of agent to do the all necessary paperwork to complete the deal. In this case he may take the help of any legal advisor if needed.
This layer of segregation helps us to understand the services and duties provided by any broker. As a good broker he must have a set office to work and clear idea of the property i.e. carpet area, built up area and the owner’s profile. He should be connected to the other property agents in the other areas as well to have a better view of market analysis and more property options. One can choose to have a property in other area as well if it does not fall into the agent’s knowledge. These agents can contact other agents and can share the commission if property is with some other agent. The system which has been study is based on individual broker. Each city has many brokers and this system is spread over many cities across 28 states of India.
21 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
22 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
PROBLEM IDENTIFICATIONTo understand the problem areas in the system I preferred to talk with the people who has been through this system and to the various agents and brokers to understand their perspective towards this system. As primary research I did not had any set questionnaire to ask to the people, I had preferred to have a conversation with them rather than noting down the points in front of them. To have a larger view of the system I tried to do the secondary research. While searching on the topics I came across many news paper articles and problem areas which people and government is facing towards the real estate agents. PRIMARY RESEARCH- (Tenants)
Priti is a working in Ahmedabad as a city planner from the past one year and she had to shift to new paying guest for some reasons. She chose to go through a broker as it becomes difficult for her to take time from her daily schedule and search for the accommodation. Following is her own experience with the broker. â&#x20AC;&#x153;I had contacted a broker through OLX. First he showed flat and we meet on the flat itself. When asked for his office he ignored to show office. Then after giving him advance on date of possession he said agreement is not ready and made me shift to other flat for few days after that when I got possession also all the service was not provided as promised. He was not legal broker nor he had authorized shop or office. At the end my office people had to deal with him and we took money back from him.â&#x20AC;?
23 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
Amruta is a student and she was staying as a paying guest in Ahmedabad after facing few problems with the owner she and her friends decided to get a flat on rent and stay rather than staying as a paying guest. While talking to her she shared her own experience as follows. “With the help of other friends once I had shifted to new flat through broker . After a long search we liked one flat and we moved into it but after few days neighbors started to complain about we don’t allow girls in the society. When we called the broker he started to ignore us and after a long time we shifted to another flat which none of us liked. “
This was the telephonic interview with Dr. Vishal to get the idea of other city. Dr.Vishal has been working as a Doctor in Mumbai from past 1.5 years. He is living in a rental house and he had some bad experience with the broker which he describes as following. “I recently had paid the deposit amount of 50,000 for the rental house in vikroli area to the broker but after few days he started to ignore my phone calls later I found out that he had taken 60,000 deposite from another client and had given the same flat to other client. After a long fight with him I got my money back since he was forcing me to see other property rather than taking money back.”
24 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
PRIMARY RESEARCH- (Brokers and Agents) As part of search of rental flat I met with few agents a and brokers this was the information given by them. As in the first meeting they all tried to impress us by telling how wide their network is and how they are best one to choose.
“I have been working as a Broker from past 1.5 years. We are team of four friends and we deal in all type of properties. I was working in TATA motors before coming into this business. If you want to buy any property from any other broker you can contact me and I will deal with him for you. We divide the share once deal is done.”
“We have team of four Brokes , they work separate also and if any client comes to my office with the help of them I show them property. We share the payment on the basis of who is bringing clients. I have a friend who work as a lawyer for the documentation. We assure our clients the fullest satisfaction and the quality service. we deal in a wide network of properties.”
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â&#x20AC;&#x153;We have team of 5 Brokers, right now we are just dealing in P.G. accommodation and rental houses as we are new. I have other business of publication as well. Earlier I was working in Gandhinagar but now I have started my business in Ahmedabad. We take flats on rent from owner and give it as P.G. accommodation to students and working professionals. I have all the contacts of supporting services like furniture, cable , housekeeping .â&#x20AC;?
26 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
SECONDARY STUDYThese are the few articles I came across s a secondary study it gives clear understanding of the problems faces by the government in terms of broker registrations and problems faced by the people in the system.
ARTICLE-1: TRANSPARENCY IN REAL ESTATE BEGINS WITH THE BROKER The realty boom in the country has spawned several professions, among which, a crucial one is brokering of real estate. Real estate brokers offer a variety of transaction-related services such as property search, documentation, and property management. Over the past few years, brokers have been dominating the transactions market. Companies are dependent upon them for sale.
This dominance also comes from the fact that there is a significant difference between the discounts offered by a broker and that offered by the company. Lured by discounts, customers too prefer brokers over direct sales. But not many would know that in addition to his personal interests a broker will mostly favour the developer. But there is a difference between a professionally driven business and a business run without standards. Generally it is seen that brokers operating in the country mostly offer services in an unorganized manner. They often work on scattered information. Usually they form groups to achieve their yearly targets. Once they have tied up with a developer firm to sell a particular number of flats within a project, they only focus on that project. There is a strong tendency that they would portray a wrong picture of projects, where you would show your interest. If you are persistent in asking about some other project, they would seek help from another broker, who may be dealing in the other project. The trend of sub-brokering is a common practice in our country. The outcome is that as a customer you end up confused and uninformed. Also, in such as case you are dealing with at least two or three brokers. The problem emanates from the fact that most real estate agents do not operate in a professional manner. Their work depends mostly on the information shared in sale brochures. For example, many of them wouldn't 27
SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
even know the exact size and dimensions of the showcased property and the projects. Many do not know the exact value of the property. They usually bargain making a base rate as their benchmark. But in reality, the actual price of the property could be even lower than the one marketed in sale brochures.
ARTICLE-2 : KEEPING NORMS IN PLACE: AGENTS NEED TO BE GOVERNED. It is well-known that real estate is a major source not only to conceal but also generate unaccounted money. Apart from the demand, one of the main reasons for the increase in cost of land is the role of intermediaries in transaction of lands. In the absence of any licence necessary for doing real estate business in India, many have entered this field as this gets high profit in a short time. Guideline values, fixed by the Registration Department, are low in many areas especially where there are very little transactions. In regard to the value of land in the peripheries of the cities, especially which are designated as Residential Use in the Master Plan while being physically used for agriculture and dry lands, the GL value is very low. The incentive offered in the IT policy is that there is no need to apply for conversion of use zones. This includes land designated for agricultural use by planning authorities. Unorganized sector Real Estate is an unorganised sector in India while in USA each state, brokers and sale persons can do their business only on getting licence from the designated 28
SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
authorities. Each State has a set of laws referred to as Real Estate Licence Law which include the provisions for the process of being licensed, the responsibilities of licensees, the administration of licence law, the means of removal of licenses in case of defaults by the licensees. The statues set forth the requirements for licensing as real estate sale persons and brokers. They might include minimum education, taking and passing a real estate examination. The sale person and broker examination are administered by Assessment systems. Inc.(ASI). ASI is an independent testing company and administers the examinations under contract with State licensing authorities. Anti-trust laws In U.S. the real estate industry is subject to anti-trust laws. At the federal level, the anti-trust laws provide specific penalties for a number of illegal activities. Each State has its own anti-trust laws. These laws prohibit monopolies and any contracts combinations and conspiracies that unreasonably restrain trade. To select a particular agent for availing services in real estate transactions, the credibility of the agent can be confirmed by contacting the state licensing agency and
the local Better Business Bureau. Realtors are required to disclose adverse information on properties they represent. A licensed real estate broker or sales person is an agent and his practice comes under the laws of agency and is governed by the real law of his state. Agency law requires that the agent abide by the following obligations to the principal. He must obey the principal's instruction as permitted by the law in force, should act in good faith, be loyal to the principal, use his professional judgement, skill and ability to account for money belonging to others that comes into his possession, perform his duties in person which means that he should not delegate his duties to anyone without the consent of the principal, should keep his principal fully informed of the developments. The principal has to compensate the agent for his services to reimburse the agent the expenses paid on behalf of the principal, to inform the agent fully about anything that will affect his performance. Agency contracts Agency contracts are employed contracts. An agency contract usually is called listing. In an open listing the principal agrees to compensate the agent only if the agent identifies a buyer with whom the principal finally deals. 29
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A single owner may have open listings with many brokers since he is obliged to pay the broker only on performance and the broker makes his efforts at his own risk. In an exclusive agency listing, the owner employs only one broker and if the property is sold by any licensed agent, the commission will be paid to the listing broker. In an excusive right-to-sell listing, the owner will pay the broker a commission regardless of who sells the property. In net listing, the owner agrees to receive a net amount while the broker enjoys the excess by which the sale price exceeds. However this system is considered as illegal in many states, as this system will tempt the broker to illegally hike the offer and act in his own interest. Dual agency Many states require agency disclosure by real estate brokers upon first contract with a prospective buyer.
that the buyer understands the agency relationship the broker has with the seller. The states do allow buyer agency too and also dual agency in which case dual agency disclosure has to be presented to and agreed to both by the prospective buyer and the owner. An additional form of brokerage known as facilitative brokerage or transaction brokerage involves no agency responsibility at all. The broker signs an agreement with both buyer and seller stating that he does not represent the interests of either party but merely brokerage service and general information to both the parties. The avenue open to one who finds himself at odds with the broker involved in a sale is either to file suit to recover damages or to file a complaint with the state licensing agency which generally has the authority to impose fines and suspend or revoke the agent's licence. Or complain to the local real estate board. Federal fair housing
The law specifies that the broker cannot proceed with any dealings with the buyer until the broker receives from the buyer a specified form signed acknowledging
The provision made in it is that the act prohibits a few activities which include refusal to show rent or sell by
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falsely representing that a property is not available and in access to multiple listing services.
damages and compensation for humiliation suffered because of discriminatory practices.
Discriminatory advertising like advertisements that the property is close to a religious institution, or ethnic or racial area.
Bring a civil action in a state of federal district court within two years after the alleged occurrence. The court could award actual damages plus punitive damages as well order to desist or refrain from an activity.
Retaliatory acts against those making fair housing complaints or intimidation to discourage complaints.
HUD may use testers to determine if the treatment of buyers and renters is equal.
Discriminatory sale lease or loan terms. Federal Law affecting real estate: Blockbusting which induces panic selling by claiming that prices will drop. Redlining that is refusing to loan or insure within a certain area
It is the policy of the United States to provide within constitutional limitation for fair housing throughout Unite States.
Coercion, intimidation or other interference with a person's rights in buying selling or leasing.
The Federal Fair Housing Act was enacted into law on April 11,1968 as Title of Civil Rights Act. The Act makes it unlawful to do any of the following.
The Enforcement Department of Housing and Urban Development (HUD) may initiate complaints on its own or aggrieved persons can take the following actions.
To refuse to sell or rent after the making a bona fide offer or refuse to negotiate.
Bring the complaint to HUD within one year of the discriminatory action. A hearing on the complaint is held before an administrative law judge who can assess civil penalties from $10,000/ 50,000 as well as actual
In India, anybody can act as a broker and may do unethical deeds. Even then he cannot be punished. Some brokers hike the price by entering into an agreement with the seller for a specified consideration 31
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and searching for a buyer who can pay a higher price. The seller is at a disadvantageous position that he cannot negotiate with other prospective buyers even when the transaction is not finalised within the specified time. The concept of Registration of Agents is followed by the Government of Karnataka for rental purposes. Under section 20 of the Karnataka Rent Act 1999 every estate agent, who is engaged in brokerage of houses, shall register his name with the Controller appointed by the Government and shall submit his return every quarter furnishing the details of the transactions handled by him and the brokerage of commission received by him in every case.
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10. Real estate agents and brokers could be anyone who makes buyers and sellers meet.
PROBLEM AREASBased on the primary and secondry study i came across following common problems faced by the temants and property buyers and sellers reguarding agent services. 1. There is no guideline followed by brokers and there is complete lack of standardization in their processes. 2. Buyer is not able to identify good broker from an incompetent one. 3. Buyer choose the broker based on their gut feeling or references from relatives, friends or colleagues. 4. Brokers lack professionalism and transparency. 5. Brokers do not notify about the flipside of an area. 6. Brokers are interested in their commission and they turn their faces away once a deal is struck. 7. brokers charge a heavy fee for their services.
11.
Real estate brokerage is unregulated.
12. In India , anybody can act as a broker and may do unethical deeds. Even then he cannot be punished. 13. Brokers hike the price by entering into an agreement with the seller for a specified consideration and searching for a buyer who can pay a higher price. 14. Brokers offer services in an unorganized manner. They often work on scattered information. 15. Brokers do not provide the services which he promise to the buyer/tenant. 16. No legal licensing is done in major cities of India for brokers. 17. All the property websites are occupied with Broker advertisements.
8. Illegal buying and purchase of property through brokers. 9. Selling same property to multiple buyers. 33 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
If we map down these problem areas in the system with a red dot representing a problem we can see that the majority of the problems are faces in the first layer of the system.
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CHALLENGES FOR IMPROVEMENT IN THE BROKER SYSTEM
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It has become a source of easy money to the brokers once they have good contacts.
To make any changes or improvements in the system there are few challenges to be faced as following due to which it becomes a challenging task ahead. •
Real estate broker system has been working as unorganized system and it is very difficult to make change in it.
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It has no governing committee to force them work according to a designed system.
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It has been a rigid system as it is working on its own principles till now.
•
People have no option to go against the brokers or negotiate as they have a power of having property options. 35 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
CONCEPTS AND SOLUTIONS-
Based on the current scenario of the real estate brokers and the challenges faced to improve it I tried to have a brain storming session to come up with new ideas which will help improving the system and to achieve my set goals of the project. Idea was to come up with the three best solutions to overcome majority of the problems in the system. out of those three next task was to choose the best of them to elaborate and check the practicality as per the current needs and scenario. My approach was to come up with the practical solutions which can be implemented easily and will help majority of the users i.e. Tenants, property buyers, sellers, Brokers and even the government.
Following are the ideas came from the brain storming session. Teaching institutes for brokers. Online certificate courses. Stage wise payment options Filters for websites and newspapers. Hire brokers and teach them and give salary based income.
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Give awards for good behavior from the government. Create a warning system Alternate options to the people i.e. do it yourself or any professional agency does these services for users. Create
advertising
platforms
in
gaming websites like farmvilla Internship programs for brokers. Publish Broker related magazines. Educate
users
about
the
system
process and precautions to be taken by them. Registration of all the brokers.
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Based on the brainstorming I came up with three best solutions which can be used to deal with the problem areas of the system
38 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
39 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
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OBJECTIVE OF THE NEW COMPONENT-
IDEA DEVELOPMENT-
Based on the pros and cons of all the three ideas it was the best option to go with the warning system idea as it will take less time and efforts to make it come into the practice.
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To facilitate users with required information before choosing any property broker.
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To give them right to judge or give their opinion on available brokers about their services.
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To create a platform to share experiences and opinions.
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To create a strong database in terms of property valuation, agent profile which in future will be helpful to government if any such data is required.
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To create a service, this will force agents and brokers to provide the service in a professional way.
WARNING SYSTEM TYPE OF SERVICEThis service will be a online user rating and review website to rate the brokers and agents.
www.brokerate.com AIMProject aim is to design and develop a system component which will be more transparent and convenient for the users.
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approach towards making the system less complicated and more transparent.
CONCEPTIn the current market scenario there are many websites are available like Magicbgicks.com and 99acres.com who works in real estate sector. According to the website magicbricks.com is a high-end property portal that caters to a global market with its unique services and novel online features and 99acres.com is an internet portal dedicated to meet every aspect of the consumers needs in the real estate industry. It is a forum where buyers, sellers and brokers can exchange information, quickly, effectively and inexpensively. At 99 acres, user can advertise a property, search for a property, browse through properties, build your own property Micro site, and visit other Indian and International sites. There are many website which caters in the same area to make buyers and sellers meet but this platform is being used by the real estate agents and brokers to advertise their properties and in most of the cases one has to go through this. Though these websites work for the users according to them this website lacks in the user centric
On the other hand there are websites like zomato.com and justdial.com which work on the principle of public rating and reviews. As a result these websites have grown faster and run by the public opinions. The concept of this service is to create such a system component in terms of service through which people can share their experiences and give their feedback and reviews about the brokers they had choose. 43
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KEY FEATURES OF THE SERVICE-
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It will be a strong platform for the advertisers to advertise their properties.
BUSINESS MODEL CANVASFor any service to work in a efficient way it is important to figure out its channels of revenue and the value proposition for the users. These things along with key activities and partnership can be figured out by the business model canvas.
VALUE PROPOSITIONThis service will work for all the property buyers and sellers, tenants and brokers. With the help of this service user will be able to see the record of the broker and the other users review about him. With the help of this platform we can create a strong database platform of property buying and selling transactions. This method will reduce the risk of frauds done by the brokers as it may hamper their carrier based on the others reviews. This service will be for the users by the users where they can trust each other rather than choosing any broker by their gut feeling. This service will be available as a mobile application through which user will be able to see property in the surrounding area and will be able to pin point it with the help of maps. This website will visit the brokers and agents to verify their services and can recommend them for the public if needed by the broker.
CUSTOMER RELATIONSHIPSKey highlight of this service is that it works on the user review basis. In this existing user community will guide the new users by their experiences. People will be able to contact previous users to get in-depth view of the broker. Service will be equipped with the professional customer care unit which will recommend users good brokers if they call. On the other hand it will help brokers to build a good carrier based on his good services. Based on their rating government can register good brokers in the future and builders can hire them for their property deals.
CUSTOMERMain focus of this service is to migrant people who are searching for a decent property and brokers. This service will be use full to all types of Tenants, property buyers, working professionals, students, paying guest, Agents and brokers.
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REVENUE STREAM-
KEY RESOURCES-
This service will be free of cost for all the users along with mobile application.
As a resource it is very important to have a fully functioning online website with easy to use interface.
Main stream of revenue will be through the advertisers who wish to advertise their properties on this website.
Service will also require a small staff to meet with brokers and agents and to have a customer care support unit.
Any recommendation service by the website will be charged. If any broker or agent wishes to advertise his property he has to pay for it as per the website rules.
To have a good amount of revenue advertisers are important for this service.
If any agent wants to have his name in top 20 options he has to pay the charge for it.
Backbone of this service will be users and it is must to have user experiences and reviews to refer to.
Revenue will also be generated through selling the property data to the required companies and government.
Another means of providing a this service is fully functioning mobile application which people can use on the go.
CHANNELS-
COST-
Main channel to reach to people is through online website. Service will be having website offices in the selected cities. For this website to work first hand meeting has to be taken in the place with the agents and brokers. Service can be availed through mobile application and telephonic call.
To have a good profit one has to take care of the cost factor. The cost factor in this service can be in maintenance of the website and buying a server sace. Salary of employees and transport of employees can affect cost factor. It is important to have a good technical team and cost can be occurred in keeping it in good condition.
46 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
KEY PARTNERSKey partners will be all the property buyers and sellers, tenants, brokers, agents, builders and advertisers who wish to advertise on the website and mobile application.
KEY ACTIVITIESKey activities will include creating fully functioning a website and mobile application, collecting a agent and brokers profile and database, staff selection for the tasks. Promotion of website and mobile application to inform users about the existence of such service. For better revenue to come better advertisers and sponsors have to be found.
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48 SYSTEM DESIGN -REAL ESATE BROKERAGE SYSTEM
SYSTEM IMPROVEMENTS-
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REFERENCES•
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http://www.moneylife.in/article/registrationof-real-estate-brokers-huge-challengesahead/33175.html http://www.getsetgrow.org/2011/12/acareer-in-real-estate-brokerage-%E2%80%93an-indian-perspective/ http://www.hindu.com/pp/2006/12/30/stori es/2006123000070400.htm http://www.consumercourt.in/other-productservices/112171-complaint-against-realestate-broker-bricks-mortar-global-real-estateadvisory-pvt-ltd.html
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http://www.indianexpress.com/news/transpar ency-in-real-estate-begins-with-thebroker/1105043/
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http://yourstory.in/2013/08/homeshikari-attk-services-trying-to-crack-the-real-estateproblem/
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http://www.telegraph.co.uk/finance/personalf inance/borrowing/mortgages/10084693/More -people-renting-houses-rather-than-owningthem-would-be-better-for-our-economy.html
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http://www.independent.co.uk/property/gene ration-rent-young-people-need-30-years-tosave-for-a-house-deposit-says-shelter8664419.html
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http://economictimes.indiatimes.com/proper ty-brokers-the-good-the-bad-theugly/slideshow/6578523.cms
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http://indiapropertydispute.com/sellingprocess/selling-process.html
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http://www.alexa.com/siteinfo/magicbricks.c om
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http://www.zillow.com/directory/real-estateagents?p=25
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http://housing.com/in/mumbai/rent/search/ 18398?utm_source=AGL-HYDSearch&utm_medium=AGL-Buy-NorRent&utm_campaign=AGLSearch&gclid=CN3_tOvhLkCFTF34godnnYAXw&f=eyJuZWFyYnkiOnsib GF0IjoxOS4xMDkxNzYxLCJsbmciOjcyLjkxOTQ 3OTc5OTk5OTk4LCJyYWQiOjMwMDAsIm5hb WUiOiJWaWtocm9saSBXZXN0In19
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