Group-buying a home? With Groffr, B-schoolers are making a deal of it

Online group-buying real estate site Groffr is hungry for more — after mediating a discounted sale of 165 flats worth around ¤130 crore in the last 10 months, that is.

Armed with funds from angel investors, Groffr, founded by two Indian Institute of Management (Kozhikode) alumni Vikhyat Srivastava and Sandeep Reddy, is expanding nationally.

For Srivastava and Reddy, who negotiate with stubborn builders for a living, the best negotiating experience happened on-the-job but not while haggling with property developers.

A few months into launching www.groffr.com in July last year, a bunch of fraudsters claiming to be anti-piracy law enforcers, accompanied by ‘policemen’ sauntered into its office in Mumbai, looking for easy money.

“They started with a Rs50-60,000 demand, we brought it down to Rs15,000 but it went on for hours,” Reddy said.

While paying them, he mentioned in passing that the local deputy commissioner of police was a relative of one of the employees.

The Rs15,000 was returned before the fraudsters left in a huff.
As for selling flats, the best deal was the one that Groffr started with — 35 flats sold in a day at a negotiated discount of 32%, in Andheri in Mumbai.

In the recent months, Groffr has expanded to other cities such as Delhi, Hyderabad, Kochi, Pune and Bangalore and is looking at even more cities.

It is a fairly simple model. Certain number of users express interest in buying an under development or ready-to-possess property and Groffr negotiates a discounted deal for them from the builder and Groffr takes a commission — measured as a percentage of sales, and typically 2% or thereabouts.

Near term ambitions are fairly modest — become a million dollar (around Rs4.5 crore) company by the end of current fiscal. But it is the lofty long term goals that Groffr founders have set their eyes on — be a national real estate broker of choice, with the best residential property deals in the market.

Having been hands-on so far in terms of negotiating discounts from builders of new residential property, Groffr founders now want to tweak their model to make it more efficient.

“I may not be the best negotiator out there, so we want to throw it wide open,” said Srivastava. “So we are essentially telling our potential clients as well as the existing real-estate broker community, ‘you strike a better deal with the builder/property developer and we will ensure a bulk purchase’.” 

In this new model, those that are not on Groffr pay roll but negotiate with builders on behalf of Groffr users, will be called Groffr Associates and they will get a share of the commission.

“The challenge they (Groffr) would face will be to provide fulfillment infrastructure to allow them to scale across more cities and still have the conversion ratios to close multiple transactions,” said Anuj Nangpal, director with London-based international property consultants DTZ. “Right from negotiating with builders, arranging finance to registering the property and handing over the keys, closing transactions calls for investments in elaborate infrastructure and technology.”

Armed with a funds recently raised of angel investors, Groffr is in the process of doing just that - scaling up to more cities and building the requisite infrastructure. However, considering the barriers to entry are not that high, Groffis does face the challenge of copy-cat competition, which Srivasatava admits have already started.

“Compared to the new incumbents, I think they (Groffr) have a better track record in hand-holding clients through the process,” Nangpal said. “While there is room for a national player in this space and the online platform facilitates that, only time would tell whether Groffr has what it takes to be that player.”

Groffr had its biggest moment of frustration only a month or so back.. The last major one happened when a builder offered an 8% discount on 35-odd new flats in a Mumbai property, worth Rs52 crore, but did a last-minute U-turn to say that they can’t offer the discount, forcing Groffr to walk out of the deal.