Thursday, February 26, 2009

Influence: The Psychology of Persuasion by Robert B. Cialdini

I would like to share book that I read recently. We can exactly know how these weapons were effectively used by RE companies & brokers so far.

This book is psychological research on factors that influenced us to say ‘yes’ or ‘no’ at various events /situations that normally occur in everyone’s life but we really would not see the outcome or results of our response when we committed. Robert B. Cialdini is professor of psychology at Arizona State University. This book is his life time research on people’s behaviors and he took various roles during his research as door to door salesman, marketing guy and PR agent etc.

Author talks about the ‘weapons of influence’ that normally enterprises and other people use for their gain over the society which means the normal public. Prof. Cialdini found six common traits of people that influence an individual to make any decision.

Reciprocation – Based on the widespread human culture and evolution, the rule requires that one has to try to repay what another person has provided by means of any service/gain. Not repaying is considered as rude or uncivilized in our society. Free food samples at malls and stores.

Commitment and Consistency – It is easier to resist at the beginning than at the end – Da Vinci. It is always our desire to move with the society, colleagues, friends or relatives on making decisions or on deciding lifestyle. We all like to get approvals from the above mentioned social set up. I know many people who signed on the dotted line for the word of a marketing guy ‘just sign we will take care of it, don’t worry’ for their investments, mortgages just because others did so; dared to ask questions.

Social Proof - This is about how a person likes the society to view his actions; this comes of out his skepticism about other people’s reaction. When he is not sure about the action he would tend to follow the predecessor. This is an easy experiment for us who live in India. Next time you come across a beggar at a temple, train or bus stop; people normally look for a predecessor. Try for once the role of predecessor and see the results.

Liking – People tend to say ‘yes’ to individual they know and like well. There are three main factors for this behavior. Physical Beauty – This halo effect makes people to yes. Similarity – We like people like us by appearance or behavior etc. Increased Familiarity – Repeated contact or information about a thing. (Advertisements, stock recos.) Why are we spending so much time and money on some of the bakwaas movies of Bachans, Khans and Rajinikanth though we know already? (No offense meant)

Authority – This is very simple to understand. We will do whatever our boss says with “I will take care of it, don’t worry’. Individual will not stand up and say ‘no’ even if he knows something is wrong. You might have read a lot in newspapers these days about 'Satyam'

Scarcity – Another simple one to quote an example under current scenario. You might be seeing lot of advertisements from real estate developers, car companies and banks with a limited time offer “Only for next three days” or “Pre Launch Discount – Very few flats”. Cool that’s it.

I read and watched Cialdini talking about this; I can go on writing about this book. I have listed only main 6 items and there many examples & other weapons detailed in the book. Get a copy if you want to overcome or positively use these 'weapons of influence'

Thanks Vik for giving the oppurtunity.

Wednesday, February 25, 2009

Unscrupulous real estate brokers will cheat you

The Hindu reports

Some go strictly by an unwritten code. They can be called honest brokers

Middlemen, or brokers as they are called, are found in almost all major business deals today. They advertise the sale, educate the client and broker the deal by functioning as a go-between.

It is in the property business that they are thriving. However, many believe that honesty does not always pay in brokering. That is, perhaps, why some real-estate middlemen become rich overnight. Their wealth often makes the buyer and the seller grow suspicious. But their capabilities in brokering and striking deals find little parallel.

They usually come as glib talkers. Their payment is fixed, often as a percentage of the sale value. In most property deals, brokers get two to four per cent of the total value as commission. Some go strictly by this unwritten code. They can be called honest brokers.

But there are others who do not care for the commission. Their aim is to strike the deal at any cost. And, often, they play an unconscionable game in achieving that end.

Desperate sellers

Their victims are usually desperate sellers. If you want to sell your property somehow, better beware. You may not enjoy the complete benefit from the deal if you fully trust the broker. Better make sure that you interact with the buyer.

Unscrupulous brokers often create situations where the buyer and the seller never see face to face. Their modus operandi is simple. They may approach you, saying that your property is not worth the price you ask.

After waiting for some time, you may be prompted to reduce the price. Then, they may approach again and make a negotiation.

For example, if you expect to get Rs. 10 lakh for your property, the broker offers Rs. 8 lakh or so. You may be somehow prompted to accept the offer.

The broker will tell you that if this opportunity is not grabbed, you will never get a better price.

Differing rates

The broker at the same time approaches a potential buyer offering him your property for Rs. 10 lakh or above.

He may be ready for a bargain. Yet, the price of sale fixed for the buyer will be more than the price of sale set for the seller.

The difference may be lakhs of rupees. But neither the seller nor the buyer gets the benefit. Only the broker makes money.

NRI realty investments drop by over 50%

NRI realty investments drop by over 50%
26 Feb 2009, 0044 hrs IST, Avinash Nair & Parag Dave, ET Bureau

The result: NRI investments in India-based properties dropped by over 50% this season, with the four metro cities and “NRI-heavy” mirco markets in states like Gujarat and Kerala being among the worst hit.

“Compared to last year, the drop in NRI interest in India-based properties has been almost 50% in all sectors. The metros showed a sharp drop in demand, largely owing to the steep prices”, says Sanjay Dutt, CEO - business, Jones Lang LaSalle Meghraj (JLLM), a global real-estate consultancy firm. “Very few luxury homes have been sold as compared to last year”, he adds.

At a time when the domestic demand in micro-markets in Tier-I, II and III cities began to slump in the third quarter of this financial year, the developers were hopeful that the demand from the NRIs will pep up the sentiments in the realty markets.

However, the global slowdown and the resulting slump froze the bullish sentiments among NRIs. “Though a far-from-spectacular number of transactions have indeed taken place this season, generalised job insecurity and a desire to conserve available cash among IT employees abroad has curbed investment demand for high-end properties, Mr Dutt said adding that the response was “significantly muted” from the NRI community this season.

The sharp corrections seen in some larger cities has also led to an “acute wait-and-watch attitude among NRIs who - just like everyone else - are now very price sensitive”, he explained.

Monday, February 23, 2009

DLF slashes apartment prices on OMR

Times Of India reports

CHENNAI: Shaking up the city's realty market, DLF on Monday announced a hefty price cut, ranging from Rs 3.6 lakh to Rs 12.6 lakh, for its residential project Gardencity - on the Old Mahabalipuram Road (OMR).

It would benefit existing as well as new customers, said K K Raman, executive vice president, DLF Chennai. The builder has introduced four price slabs, three for old customers and one for new entrants. Those who booked apartments during the soft-launch of the project, at Rs 2,800 per sq ft, would get a discount of Rs 300 per sq ft. The new price for those who booked at Rs 3,000 per sq ft last year is Rs 2,550 per sq ft. The maximum discount of 18.75 per cent Rs 600 per sq ft has been given to those who booked at Rs 3,200 per sq ft between August 2008 and February 2009. The price for new customers is Rs 2,650 per sq ft; the price will hold till May 31, 2009.

While the minimum savings on the smallest apartment 1,200 sq ft at Rs 300 per sq ft works out to Rs 3.6 lakh, the maximum benefit for the largest apartment 2,100 sq ft at Rs 600 per sq ft is Rs 12.6 lakh. This is also the highest price cut announced for an ongoing project by any promoter in Chennai after the economic crisis set in. Significantly, the promoter has also decided not to collect any interest for delayed payment from existing customers.

Speaking about reasons for taking such a drastic step, Raman said: "With unprecedented events in the world economy affecting the real estate sector here, bringing changes in input cost and interest rates, DLF went back to the drawing board and created further efficiencies. These benefits are being passed on to consumers."

DLF entered Chennai's residential sector with a bang in January 2008 by announcing the biggest project of 3,493 apartments spread over 53.5 acres in Semmanchery, 2 km off OMR. Its soft-launch made headlines with close to 2,200 people booking flats in less than two weeks. All major empanelled realty consultants were in the race for clocking the maximum number of bookings for the project. Three months later, when the formal launch happened, several hundred customers opted out, perhaps anticipating the market downturn in the months to follow. The DLF sales team took several months to make up for those cancellations. Currently, the project has about 1,800 bookings in the first two phases.

Ramesh Nair, MD, Jones Lang LaSalle, an international realty consultant, said: "DLF's price revision could drive up demand for the project as it becomes more affordable for home buyers. It will also lead to most developers reducing their unit sizes and building specifications apart from reconsidering their pricing strategy."

At least half-a-dozen residential projects on OMR, in which private equity funds, mostly foreign, have been parked on a pre-agreed condition that sales will be effected at a minimum price of Rs 3,200 per sq ft, will be affected by the DLF move. Also, customers who had booked apartments in other ongoing projects on OMR at higher prices could apply pressure on their builders. In short, a price correction for properties on the much-hyped OMR is perhaps underway.