Realtors look to barter deals

Realtors look to barter deals
HT Business, 27th January 2009, page 19

With credit turning tight and buyers disappearing, real estate firms are experimenting with barter — a transaction where goods or services are directly exchanged for other goods and/or services — without the use of money.

The New Delhi-based AEZ Group has invited proposals from manufacturers and suppliers of materials and equipment like steel, aluminium, elevators, escalators and generator sets for barter against ownership of property.

“We need material for construction and suppliers need to dispose off their surplus stock that they may have ordered on commitment of the developer,” said Shrey S Aaren, director, AEZ Group. “This made us go in for barter proposals. We have received more than 100 queries so far.”

It could be a win-win situation for both, the developer and the supplier, said Hemant Shah, chairman, Akruti Nirman. “The developer can help the supplier dispose off his surplus stock and the supplier the developer’s real estate. It offers a way out of the (current) logjam. We are open to such schemes.”

Such deals could also help improve profitability in a sluggish market. “It is one of the innovative ways of improving your profit margins,” said Anshuman Magazine, managing director, CB Richard Ellis, a real estate consultancy. “I think the trend is bound to increase. It is important that the location of the project is good and the property has been valued right.”

On the other side, Abhishek Somany, joint managing director, Somany Ceramics, is open to such deals. “If we were to go into something like this, the category of the builder and the location of the property will be important,” he said. “Besides, we would prefer a commercial space barter to a residential space as that would enable us to use the office or godown space.”

For barter system to work, it is necessary that suppliers have the cash flow and are willing to find value in such deals, said Sanjeev Srivastava, managing director, Assotech. It is likely to be more successful in case of manufacturers of elevators and escalators where the suppliers have a long-term involvement with the developer, he said.