Franchising yet to be tested
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Though franchising remains a new concept in India, it is likely to see a huge spurt in the coming years, given the growth path of the real estate industry
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Franchising in real estate is a concept yet to be tested, especially in the Indian market. While the concept exists in various other industries, one of the reasons why it has not been popular in the real estate segment is because the segment has hitherto been closely guarded, with very little transparency in dealings. There has always been a reluctance to part with information and data, preventing the doors from being opened to third parties.
But with our country on a high growth path and the real estate market booming to cater to this high growth rate, the scenario now finds too many individual players with most operating with small margins.
It now makes economic sense to have small individual players grouped under one banner to offer them better clout and accessibility to changing market trends.
This is best done with a franchising model where a large player opts to offer his global expertise, market knowledge and bouquet of professional services to smaller companies which will now operate under his banner.
The advantage here is that the larger companies looking for merging smaller entities under their brand name will typically operate on an all-India basis.
The smaller real estate entities will then have access to market information from this large player and will also be in a position to carry on transactions for customers who are no more localised.
It is a win-win situation. For instance, for a small realty company, it would mean going national as its reach will extend beyond the local market.
Wide reach
He would be able to assist a customer in any city to purchase or sell property. So a real estate agent in Bangalore, for instance, will be able to source property in Mumbai by accessing the information available with the parent company.
For the large parent company, franchising is the best way of going ‘local’ and providing services even in smaller towns, so it is not perceived as just another ‘international’ company with no knowledge of the ‘local’ market.
Besides this, the smaller player will be able to advertise under the parent brand name, save on advertisement costs as well as cost of collecting information locally through his own network..
Typically here, the franchisee operates as a tie up with popular malls who themselves have their sister concerns in various parts of the city as well as different metros.
These places will have property shops which will be in line with the requirements of the parent company.
These property shops will be entities belonging to local players who are running them as franchise units.
While this kind of franchising is common in the rest of the world, the concept is just catching on in India.
Local players are not showing interest in this because of the huge investment involved and the need for parting with information.
However, multinational real estate giants have evinced keen interest in doing so. A few players have presently entered the market and are testing the ground. Notable ones are the Australian company L. J. Hooker and the Real Estate Bank of India (REBI).
The coming years are likely to see a huge spurt in the franchise model.
(The author is CEO, Propmart, an end to end real estate solutions provider)
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