Group buying: Alternate way to own your home
What is group buying?
Group buying is collective buying. It offers products and services at significantly reduced prices as the product is purchased by a relatively big number of buyers. The basic condition of group buying is that a minimum number of buyers would buy the product.
Group buying is relatively new concept in case of real estate market in India. It is a fruitful strategy on the part of the buyers as group buying can enable them to obtain a discount of up to 25% in realty deals. Now many internet sites and portals offer group buying opportunity to customers in India.
As property prices have gone up by more than 200% in the last decade in most of the Indian cities, group buying has emerged as a viable option for the home buyers to get discounts and to own a home at an affordable rate.
How does group buying work?
In group buying, there is usually an intermediary between the home buyers and the builder. First, potential home buyers connect with one another through a common platform. The common platform to bring the buyers together is provided by a third party or a group buying company. Then, the buyers form a group among themselves. The company goes to the builder with few orders and negotiates for possible discounts on the part of the buyers.
The builder is provided with an opportunity to sell off a number of properties. Hence, a discount amount is agreed upon which is normally higher than what is offered in individual cases.
The amount of discount available on group buying depends on the construction stage as well as the location of the project. If the real estate project is at a pre launched stage, then it is the ideal time to avail maximum discount as the future sales remain uncertain and the developer would want to sell off as much units as he/she can in the initial stage.
Similarly, if the project is nearing completion and the developer wants to sell off the remaining units, the buyers can avail high discounts for the units.
The home buyers would need to pay a service charge to the registering company. The charge can range form 0.5% to 1%.
Advantages for home buyers
Home buyers cannot exert their influence on the realty developers to get a significant discount while buying a house. As individuals, they do not possess strong bargaining power to acquire a deal with a rebate and by forming a group, they can strengthen their bargaining power.
The members of the buyer group can share common services such as a home loan, lawyers’ fee and compliance, needed to complete the transaction. Bank loans can be availed easily and at better proposition as the banks like to get bulk business through group buyers. Usually buyers can avail discounts in various charges like concession in processing fee or complete waiver of processing fee, lower interest rates and also can avail waiver in the search and valuation charges.
Advantages for the developer
Usually the down payment is higher in case of group buying and the developer can get hold of much needed cash at the initial stages of construction. Real estate developers face higher interest rates and an uncertain demand in the present Indian real estate scenario and hence bulk amount of down payment can bring in breath of fresh air to them.
Developers welcome group buying because it reduces their selling cost as well. The selling cost comes down as the developers need not spend much on marketing and customer acquisition. The savings can be awarded to the home buyer as discounts.
Group buying helps developers to sell off units at a faster rate. Thus it also offers an opportunity for them to concentrate more on future projects.
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Image courtesy of renjith krishnan at FreeDigitalPhotos.net
