Anything Goes in Bangalore’s ‘Wild West’ Real Estate Market

BANGALORE —On her annual summer visit to Bangalore this year, Vibha Pingle, founder of a nonprofit based in Cambridge, Mass., set out to help her aging parents sell their large suburban home and buy a centrally-located apartment. Ms. Pingle accomplished neither task, but she did get a crash course on the untamed ways of Bangalore’s real estate trade.

One real estate consultant, as many brokers call themselves, advertised her parents’ home in the newspaper, but when prospective buyers trooped in to inspect, the consultant did not even show up. Another sent buyers to the house unannounced. Neither seemed inclined or equipped to help with financial negotiations or legal paperwork but expected a 2 percent commission on the sale.

Exasperated, Ms. Pingle advertised the home in the papers herself, only to find more consultants trooping in saying they were “second” or “third” sub-brokers. They wanted the full commission for introducing potential buyers. The neighbor’s driver came around to the house saying he had lined up an interested party and wanted to discuss his “cut.”

Returning home after aborting the buy-sell mission, she described the experience as reminiscent of the “Wild West.”

Bangalore’s recent real estate boom is best illustrated by the way homes are rented, bought and sold. As middle-class and upper-middle class job seekers flood into Bangalore, India’s fastest growing city, real estate prices have gone only one way: up. Prices of homes and apartments have tripled or quadrupled within the span of a decade, prompting an all-out stampede to grab a piece of the action.

A doctor living in an upmarket housing community cataloged the people he had to deal with while selling his home: drivers from the neighborhood, maids and cooks in his building and security guards down the street. They all wanted to introduce potential buyers and they wanted a commission for doing so.

Ms. Pingle said, “The whole attitude is, ‘How dare somebody buy or sell something worth tens of millions of rupees without giving us a cut of the pie.’”

Uma Shankar, 36, who runs a newspaper delivery agency in the Koramangala neighborhood, is one of those “consultants” Ms. Pingle was talking about. Mr. Shankar started facilitating buying, selling and renting homes and offices in order to supplement his 10,000-rupee ($200) monthly earnings.

Mr. Shankar’s modus operandi is simple: He works within a set geography where he has a network of about 50 other “agents” like him — including 15 other newspaper vendors – each with their own subsidiary networks. They mainly cater to the middle class and informally swap information about demand and supply.

Their service stops at matching prospective buyers and sellers, or introducing homeowners and renters. When the transaction goes through, the commission ranging from a few thousand rupees to two percent of the total sale value, or one month’s rent in case of a rental, is split between those involved in trading information.

Mr. Shankar’s network is a motley assortment of service providers, most of whom do not work out of an office or have one — a cellphone is all they need. One sells milk, offers photo-copying and pay phone services and sports a poster with his phone number and the words “To lease/Rent/Buy/Sell Call …” Another consultant drives an auto-rickshaw, Bangalore’s ubiquitous three-wheeled public transport, on which he advertises his realty services. Yet another has hung a sign in the local Kannada language above the cubbyhole where he presses clothes, “Illi manegalunnu kodisalaguthade” (Houses available).

Competition is fierce but “sometimes you hit a lottery,” Mr. Shankar said.

While buying and selling does not offer a guaranteed income, it has helped Mr. Shankar buy a plot of land in a Bangalore suburb. He hopes to build a house there and move his family from their current rented home.

The chaos in the market stems from the buyer-seller and owner-renter information gap, said Sumit Jain, co-founder and C.E.O. of CommonFloor, a communication portal for apartment dwellers and residents of gated communities. Buyers, renters and owners don’t have enough information about the market, as there is no organized way in which, sales and rents are listed. Unlike in the West, there are no real estate Web sites in India offering aggregated information, and the few that exist are not tapped into very often. “By leveraging information, drivers and cooks earn more in a month than they make out of their primary profession,” said Mr. Jain.

CommonFloor has begun profitably aggregating such demand and supply, and once other companies follow suit, the self-styled agents are likely to find themselves out of a job.

But for now, the trade is still raucous and cutthroat. Agents have to regularly bribe building security guards in return for tipping them off on which home is falling empty or who is looking to sell. In more upscale communities, property managers demand a referral fee to let agents in on which home or apartment is up for rent or sale.

There are 3,000 real estate consultants in Bangalore and 17,000 in the northern city of Gurgaon in Haryana state, said Mr. Jain. In Bangalore, Mr. Jain said he knows many doctors, accountants and software engineers who have quit their profession to turn real estate consultants. He said he recently encountered a real estate consultant in Gurgaon who arrived in a Mercedes but spoke in broken English.

“You don’t need any training, you don’t need any qualifications so people think there is easy money to be made,” said Natasha Medhora Irani, who runs Splendor Estates and caters mainly to companies. The local trade association known as Bangalore Realtors Association of India, or BRAI, which is affiliated to the national trade association, is attempting to put rules in place, like requiring all real estate agents to be registered with it and regulating commissions on sales and rentals.

Contrary to newcomers’ expectations, it is a tough business, said Ms. Irani said. It takes all her energies to see that deals did not slip through, she said, and she relies heavily on personal networks, offers professional advice and helps with the paperwork. “I deal with a lot of fussy clients who I have to handhold until they are comfortably settled in,” she said.

Saritha Rai sometimes feels she is the only person living in Bangalore who was actually raised here. There’s never a dull moment in her mercurial metropolis. Reach her on Twitter @SarithaRai.