Buying a home? Groffr can get you a BIG discount!

If you are looking to buy a home, Sandeep Reddy and Vikhyat Srivastava may help you get a sizeable discount. The duo has started a company that, according to them, can change the way people buy property.

Built around the concept of collective buying, Groffr.com aggregates demand for real estate projects and then approaches the builder for a discount for the group that a single buyer cannot negotiate.

"We aggregate single buyers who are strangers to each other and form a group out of them and enable them to get a higher discount," says Reddy.

"Group buying has been prevalent in real estate for long now. There are Gujarati and Marwari communities who book flats in projects in bulk getting great deals in the process," he adds.

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Both Reddy and Srivastava are graduated from IIM Kozhikode in 2006, after which Reddy worked as an analyst with Kotak Institutional Equities and Srivastava was a part of the Kotak Real Estate Private Equity Fund.

They started Groffr in June 2010 and have already sold more than 80 units across Mumbai, Bengaluru and Hyderabad.

"So far we have sold property worth Rs 90 crore (Rs 900 million) through Groffr, helping people save around Rs 19 crore (Rs 190 million) altogether," confirms Srivastava.

"Till date we have done the following deals: Oberoi Splendor (JVLR, Mumbai), Kohinoor city (Kurla, Mumbai), Indiabulls Green (Panvel, Navi Mumbai), Puravankara (Off Sarjapur Road, Bangalore), Emaar MGF (Hyderabad), Neptune (Bhandup, Mumbai)," he says.

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The business model of the company rests on the commissions made through the deals. "We charge a brokerage fee of 1-2% from developers in our transactions and in a few cases where we are able to negotiate a fabulous deal, we also charge the buyers a fee for getting such a deal," says Reddy.

Explaining his modus operandi, Reddy says, "Once enough people have expressed their interest in a deal, we get in touch with them and arrange a group site visit where the property developer interacts with the buyers."

"We call this collective wisdom with buyers getting a sense of comfort as they know that there are people who have similar profiles and are interested in buying a property in the project. The final closure of sales happens in the stipulated time period. The limited time period also helps in higher conversions since people know that they can't postpone their decision indefinitely after liking the project," adds Reddy.

Group buying has been the buzzword in the Internet space worldwide for sometime now. Much of the action in this space was initiated by the Chicago-based collective buying company Groupon's raising a hefty $30million in its second round of funding early this year.

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Groupon's valuation of $1.2 billion led to a sudden mushrooming of its clones all over the world. In India alone, over 15 such web sites have been launched in the last few months. These sites offer attractive discounts to groups of buyers from local retailers in various cities.

The catch here is that the discount becomes available only if a certain number of people agree to buy the product.

For instance, Dealsandyou, a company that features daily deals on things to do, see, buy and eat in some of the leading Indian cities, recently sold 1,100 coupons of kathi rolls from a famous Delhi restaurant at 51% discount.

Companies like Taggle, Mydala and Koovs, Khojguru are offering deals on spas, restaurants, gym memberships, beauty salons, tattoo parlours, tarot card reading and more.

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So far such deals have been largely limited to food, health and beauty segments. Groffr is probably the first company in the world to offer the benefits of collective buying to real estate buyers.

"These guys are really thinking category expansion and are thinking out of the box. Companies like Groffr are expanding into a new category of very big ticket size products. Most other group buying sites are trying to make the model succeed on small ticket size items," says Harish Gandhi, executive director, Canaan Partners.

"People have extreme discomfort about making large financial decisions and there is a lot of comfort in being a part of a group process. The discounts that can be offered on such group deals has a high absolute value and therefore makes a lot of sense to the buyers," he adds.

According to Reddy, buying property in groups is a concept that is catching on fast. "We have already done enough deals to vouch for the fact that people in India definitely are keen to purchase property in groups and we have been able to make groups out of strangers. In a lot of places, we have seen that people who did not buy property through us for any reason are now forming their own groups of friends or colleagues in a company to purchase property."

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"Going forward, we are investing in technology heavily. We believe the real power of the platform will be our next version where we will allow buyers to suggest a property and form groups online. These deals will be live for a month and anyone can join these groups. Once a critical size of 10-20 buyers have joined the group, we can ask sellers (real estate developers) to bid for this group by offering lucrative discounts," reveals Srivastava.

But Gandhi has some advice to offer here. "Companies like Groffr will need to clearly demonstrate the value they offer and educate builders/developers to play this game smartly. Any individual who knocks on the door of the builder/developer and asks for the same price as companies like Groffr, in my opinion, is unlikely to be turned away by them. In the long run this would hurt the builder/developer himself and he could be reluctant to offer further deals to companies like Groffr."

However, while it may be too early to say how successful collective buying of real estate will be in future, what Reddy and Srivastava have created is a company with a difference in the cluttered space of group buying where most companies are struggling with similar city specific small value deals and facing intense competition.

Another factor that goes in their favour is that there is no payment to be made online. The web site is used only to showcase deals and collect people to form groups. So unlike other group buying companies, Groffr's fortunes are not linked to the success of e-commerce in India.