Investment Strategy: Group buying for home buyers

Group buying has been implemented across businesses and geographies. We see tremendous opportunities for group buying in Indian residential real estate. In this article, we briefly share an overview on group buying. 

In the most common approach, home buyers reach property developers independently and take the run-of-the mill negotiations approach to get a discounted price. It is practically impossible for any seller, let alone developer, to give exceptional discounts to buyers individually. On the other hand, if a seller gets an opportunity to offload a large chunk of her inventory at one go, she would be happy to work out the lowest possible rates. A bulk sale generates massive liquidity and helps sellers mitigate inventory holding costs not just in real estate but across industries. For instance, a number of mid and large companies come together on digital platforms to procure commodities and raw materials together so that all benefit from reduced prices. Collective bargaining power of a group of buyers trumps individual negotiation capabilities by far. 

The need to sell apartments in bulk is even more pressing for real estate developers for two primary reasons- one, almost all inventory is financed with high cost debt. For every day, she keeps the inventory unsold, she has to bear heavy interest from her pocket. Two, post demonetization and GST, the HNI investors who used to buy cheap at pre-launch and flip completed properties to end users have turned very cautious or backed out completely. With sales getting adversely impacted because of the ongoing COVID crisis, the affluent individuals are going to be all the more cautious with the way they manage their liquidity. This leaves a whitespace for a strategy that helps buyers sell their inventory in large numbers quickly. Group buying is a perfect fit.

Traditionally, demand aggregation of home buyers have been done by brokers and agents offline. They leverage their databases and networks to bring potential buyers together and negotiate prices from developers on their behalf. This approach is inefficient and has low scale and reach. We believe a digital and machine learning-led platform for demand aggregation will be disruptive and change the way buyers discover the lowest price in a project they are interested in. Such a platform will empower buyers with scientific price discovery mechanisms, capture customer behaviour logically, and eliminate emotion or skill-based negotiation tactics.

In order to learn more about group buying in real estate and how it may benefit you, please reach us on +91-9108447825 or +91-9108447829.  

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