Barter System: A trend emerging again in Real-estate
Barter system has been used in a major part of our history. It is the basis of our modern trading system, and the building foundation of the way we transact nowadays.
It is a very simple concept in which two parties are involved in a trade where the exchange goods which are useful and needed by both. For example: if a person, ‘A’ has wheat then he will be searching for someone who is in need of this commodity and can exchange it with, say pulses, which is required by person, ‘A’.
When he finds this person the exchange of commodities or Barter happens. In layman’s language we can say barter system is a form of trade where two parties exchange a commodity or goods and no monetary transaction is involved. It’s all about meeting each other’s necessity.
If we go in depth then the modern age buying and selling is also a barter system where one exchanges a commodity for fulfilling their requirement of money. We can say that barter system is the necessity for our day to day functioning.
However, how it can be imbibed in real-estate?
In realty space it is not a new concept. It was already prevailing in this sector in one or the other way. In the year 2009 this trend was at its peak and now it has emerged again. The idea of barter system in Realty sector is to help customers find each other.
I would say even a developer is the customer. They want to trade properties or land in exchange for money which is later on used to invest in another property.
So for cutting short this process, the Barter system was introduced.
It is a three-way transaction involving party, ‘A’, a Developer and party, ‘B’.
Now the party, ‘A’ has a property which is a dead investment for them as it is not yielding any benefits, In fact, it is a liability as the owner has to spend a certain maintenance charge every month.
But, the person, ‘B’ is need of the same property and doesn’t, have enough money for investment. But, possesses a property which may be useless to him and fruitful to ‘A’. They both contact the developer to sell off their dead investments.
Here, the developer offers them a platform where they can simply exchange their dead investments without involving any monetary funds.
Another way to do it is exchanging your dead investment with the inventory that the developer holds and later on, he can sell off your dead investment. The idea of barter system is to help the consumers find an investment opportunity that will reap higher returns.
As they say the best investment one can make is on the land itself.
Barter can benefit investors in numerous ways. The major and most important advantage is getting an investment with a good ROI in exchange for a dead investment which is more of a liability and that without the involvement of monetary transactions.
In the end, I will say this is the trend which is emerging again and everyone must grab this opportunity and turn their liabilities to assets.