Developers offer flats in lieu of brokerage

Consultants and brokers are having a tough time recovering their dues from developers on time because of the slowdown in the overall real estate sector.

Leading brokers, involved in selling luxury apartments, along with consultants are being asked by developers to accept apartments from the developers’ own projects in distant suburbs in exchange for the brokerage.

The real estate sector, especially the residential segment, is struggling due to excess inventory and less demand. This has resulted in reduced cash flow among buyers and developers, which in turn has led to fund crunch among developers.

The first half of 2016 witnessed the lowest number of new residential launches in the last three years across the top eight cities, to 107,120 units, a 54 per cent drop from 232,490 units launched in the first half of 2013, according to property consultancy Knight Frank India.

Gulam Zia, executive director, Knight Frank India, said, “We have been dealing with several top developers who come to us for consultancy but there are several developers who after consulting claim they are facing financial crunch and offer us apartments in their inventory in exchange of our consultancy fees. But we do not opt for the same as according to our policy we only opt for money in exchange of our services.”

Mr Zia added, “It is not only that consultants are finding it difficult to recover their fees but also several suppliers and vendors who provide all type of materials for construction of buildings are also in trouble.”

Vikram Mehta, president, Confederation of Real Estate Broker’s Association Of India (CREBAI), said, “There were instances when instead of brokerage we are offered apartments by the developers in their project but they are located in distant suburbs and ultimately we need cash flow for running our business.”

Mr Mehta said recently that a leading media group appointed him to sell 312 apartments it had obtained from several top developers in exchange for it failing to make its payment for the advertisement published.

Managing director of Liases Foras, a real estate research firm, Pankaj Kapoor, said, “I know several professionals from the private consulting firm who are facing difficulty in recovering their fees. Mainly, it is because of the circulation of money not being stable. There is excess supply but no demand that affects the whole chain of money trial in the market.”

Delhi and National Capital Region (NCR) tops the unsold inventory chart followed by Mumbai Metropolitan Region (MMR), according to survey by Liases Foras.