Read the following passage to answer the given question based on it Some words/phrases are printed in bold to help you locate them while answering some of the questions.
A Russian proverb advises us not to buy a house but the neighbourhood. While till some years ago it was impossible to “dictate” who lived with you in the same quarters, today when you think of buying a home you could actually create your own dream neighbourhood thanks to the Internet and the group buying model which has been applied in different industries from cars to baby merchandise to pet care products. Now the trend is catching on in the real estate sector with many sites as well as broking firms offering groups deals on real estate projects in India.
The way it works is simple. Take xyz.com for example. This is an online and offline “integrated” platform which showcases property. It uses social media networks to let buyers know about possible good deals and leaving it to them to do some viral marketing. Once a large group of buyers is thus formed xyz.com introduces it to the developer and helps negotiate a suitable discount.
Since the developer doesn’t have to pay for the marketing, it is willing enough to pay these companies a transaction fee which is a percentage of the total value of the deal. For the buyers it offers the best rates at no fee thus making it a win-win proposition for all involved
The developers also benefit by getting substantial cash flow giving them a good amount of working capital. In today’s real estate scenario, bulk buying could be the answer to the market slump and the long awaited cash flow, says the Founder of xyz.com.
Sometimes the discount size is not to be sneered at. Discount on group buying vary from 5-30 per cent the average divergence from market rate being 25-30 per cent Customer buy-in is the model. But is it a temporary fad ?
In a way, the online group buying set-up is similar to the model developers share with speculators who buy in bulk even before the project gets kick started and get discounts of 30-40 per cent. They pay 50 per cent of the property value upfront. Group buying companies prove more beneficial for developers as they get away with providing lesser discount than to speculators.
Some sound a note of caution on the trend. Present conditions are conducive for this business model as group buying works well in a situation where stocks are moving slowly markets are jittery and there is ample supply. It may not work in a seller’s market.Another caution is Very often the builders do not offer the best inventory to the group in terms of location and utility. The buyers have to use their astute judgement to avoid such traps.