Broker Exodus: Slumping Home Sales Force Real Estate Professionals to Seek New Ventures
Real estate brokers in major Indian cities, including New Delhi and Bangalore, are facing unprecedented challenges as the housing market experiences a significant downturn. One such broker in Bangalore, having recently shuttered his realty brokerage firm after a precipitous drop in home sales, has now opened a stationery shop in the same location. With approximately 75% of his previous revenue stemming from apartment sales, the remaining from rentals, he explained the transition, saying, “With home sales dropping, it doesn’t make business sense anymore.”
This anecdote is representative of a larger trend sweeping across major metropolitan areas. In Mumbai, another mid-size brokerage has established a fast-food establishment to supplement dwindling income, while a Nagpur real estate professional has abandoned the industry altogether in favor of an ice cream parlor.
Smaller Players Bear the Brunt of Market Downturn
These individual struggles highlight the broader challenges facing the industry. While large, established real estate firms have weathered the storm, smaller players, such as brokers and agents, are increasingly being compelled to explore alternative career paths. This exodus has had a cascading effect on the numerous individuals employed by these smaller outfits—each typically employing between five and fifteen people—as they now find themselves seeking opportunities in sectors ranging from retail and banking to insurance and call centers.
The real estate industry in India provides employment for an estimated ten lakh individuals nationwide with a vast majority working within the informal sector. These job losses within the smaller real estate businesses, particularly among the unorganized sector, now pose a broader economic concern.
Market Data Paints Grim Picture
Data from the first quarter of 2011 reveals the stark reality of the situation. Home sales plummeted by 17% in Mumbai, 14% in Bangalore, and 15% in Hyderabad. Consulting firm Jones Lang LaSalle reports a staggering 25% and 16% of unsold residential units in completed or near-completion projects (within 6-12 months) in Mumbai and Delhi-NCR, respectively. This trend extends to other major cities, including Bangalore, Chennai, and Kolkata, with unsold inventory ranging from 12% to 19%. Even tier-II and tier-III cities, though experiencing steady sales, are grappling with growing anxieties stemming from escalating interest rates, which have surged to approximately 11% from 8.25% a year ago.
Impact Disproportionately Affects Smaller Brokers
The president of the National Association of Realtors India emphasized the disproportionate impact on smaller brokers stating, “For smaller brokers, the impact of the current market factors is a lot more compared to the larger brokers.” He added, “Even for our members – who are fairly well-off – business is down 40 percent compared to 2009-10. But the smaller guys are in trouble and are setting up businesses that move on a daily basis. Many I know have asked their employees to look out”
Ravindra Bramhe, chairman of the Maharashtra Property Brokers’ Association echoed these concerns. While business opportunities are scarce there remains intense competition even for this limited work. Exemplifying this is the Noida Expressway near major projects. Here, real estate brokers can be observed huddled inside small tents, enduring oppressive heat while vying for potential clients. Those less fortunate, unable to afford such shelters, line the roadsides, desperately pursuing passing vehicles, brandishing brochures and flyers promoting various projects. Within the industry, this phenomenon is referred to as the ‘broker mandi’.
One affected broker, Mr. Chaudhary, lamented, “All my friends and colleagues are now looking outside real estate before things get worse.” Many professionals are returning to the insurance sector, while others seek opportunities in small call centers or retail stores, demonstrating the widespread impact of this housing market downturn.