Group Buying; A better way to buy your dream home

X Builders is a real estate company. The company has just built a housing complex comprising 500 flats. Since the real estate market is down, X could not sell all the flats and is left with 350 flats still up for sale. X is ready to give heavy discounts if someone can buy in bulk, say 50 flats. Quite a few builders are in a similar situation as X. In spite of the heavy discount for a bulk purchase offer, there were no takers as why would anyone want to purchase 50 flats in one go?

Rahul, Satish, and Anmol are software engineers at Pune, Mumbai, and Bangalore respectively. They know that the market is down and want to make the most of this situation to buy a home. However, they are not able to find a good property deal with attractive discounts in such a subdued market.

How can X Builders and potential home buyers like Rahul, Anmol, and Satish get in touch with each other? It seems obvious that if these potential buyers and X Builders got together, a mutually beneficial arrangement can be worked out.

Group Buying - a new trend in real estate buying

This is where the group buying concept comes into the picture. Since the last few years, group buying has been touted as a viable option for home buyers looking forward to getting attractive discounts.

Here is how it works. Potential home buyers connect with one another through a common platform and form a group. The company then goes to the builder with the group orders and negotiates for possible discounts. The builder, sensing a good opportunity to sell a number of his properties, agrees to the discount. Typically, there is negotiation on discount but the discount is higher than what is offered in individual cases.

Bricks Infra is an exclusive platform dedicated to group buying of homes, which help individuals to sort themselves out into like-minded groups, who are interested in bulk purchases of certain properties. Once a group is formed, the company negotiates with the builder on the group's behalf to get better discounts.

Compelling proposition for property developers

One of the reasons for the popularity of group buying is the advantage it offers to builders. Due to the cash flow in group buying, developers who are just starting to build the complex get much needed cash. In the era of high interest rates and uncertain stock market, the cash flow comes as a blessing for the developers.

Moreover, developers get a readymade market to sell their properties in bulk without spending anything on customer acquisition and marketing. This reduces their cost of selling. This savings can be passed to the home buyers in the form of extra discount.

Group buying also helps developers sell the properties faster and focus on the next venture.

Advantages of Group Buying for Home Buyers

The typical home buyer is in constant search for a better deal. As individuals, home buyers cannot negotiate for a better deal since it will not make economic sense for developers. The transaction cost with each individual will be high for developers. Also, an individual home buyer will not have bargaining power in a market dominated by real estate developers. By coming together and forming a group, the individual buyers can increase their bargaining power and hence will be able to bag a better deal!

For example, suppose X developers' prices 2 BHK apartments in its residential complex at 6800 per square feet. The company can negotiate the price and bring it down to 5800 to 6300 per square feet for group buying of apartments. This discount will be much more than what an individual home buyer can negotiate with the builder. Typically, the company which negotiates on behalf of the home buyers will probably be able to get a 7% to 15% discount on the price of the property. This means if the price of your dream home is 70 lakhs, you can save up to 7 lakhs in discount.

Another advantage is that the group can share common services needed to complete the transaction such as a home loan, lawyers' fee, and compliances. In these areas the individual home buyer as part of a group, will have more power for negotiation. How does it work

In this case, the potential home buyer posts his or her wish to buy a home in a housing complex. The deal is then listed on the website and potential home buyers are encouraged to form a group if they want to buy a house in the same housing complex or from the same real estate developer. The home buyer can also visit the office of the company and get the required information. Once the group reaches the critical number, the sales team contacts the home buyers, aggregates the demand and submits the bid to the builder. The deal is then negotiated, and finalized. The home buyers get the agreed group discount.

The other way a buyer can initiate the deal is to provide his or her requirement to the company. The company looks at its database and finds out home buyers with similar requirements. Based on their requirement, the company proposes some of the housing complexes. Once a critical mass accepts the recommendation, the sales team negotiates with the builders and gets the discount as applicable.

The Company initiates the group deal

In this case, the company posts a potential housing complex that will come up or an existing one. The deal is displayed with a discount on offer at the website of the company. The deal also has an expiry date after which buyers cannot form the group. The buyers are encouraged to form a group to avail the discount. Buyers typically register and then show interest in the property posted by the company.

Once the group achieves the critical number, the company submits the bid to the builder. The deal is then negotiated, and finalized. The home buyers get the agreed group discount.