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Business

Lianjia freshens up musty business of buying, selling homes in China

SHANGHAI -- Big green signs began popping up like mushrooms across Shanghai this summer, marking the locations of Lianjia ("home link") Real Estate Agency offices. Despite the stagnant Shanghai real estate market, the company quickly expanded its network by taking over, revamping and reopening realty offices that had gone out of business.

Lianjia is doing a booming business despite charging higher fees than online-only competitors.

     Every Lianjia outlet is neat, clean and brightly lit. Its display windows are plastered with flyers on available properties, complete with photos and room layouts. The chain has given a makeover to the musty image of real estate brokers in China.

     Lianjia got its start in Beijing in 2001 and now operates about 5,000 outlets in 22 cities in China, including Beijing, Shanghai, Shenzhen, Chongqing, Dalian, Tianjin, Nanjing, Chengdu, Qingdao and Hangzhou. It employs more 70,000 sales staff and expects to do more than 500 billion yuan ($77.9 billion) in business this year.

     Lianjia already controls over half the real estate brokerage market in Beijing and is hungry for more. It is buying big companies in other parts of the country as it tries to build a nationwide operation. In February, it acquired Chengdu Yicheng Real Estate, which held over 30% of the the market in the central Chinese city of Chengdu. The following month it bought Shanghai market leader Dooioo Real Estate. Then it snapped up Zhonglian, which operates 167 outlets and holds the No. 2 spot in Shenzhen. Its next target was Ghuanzhou market leader Mantanghong. Lianjia has also quickly expanded in Shanghai, increasing its outlets from 200 to 1,000. It now employs 20,000 salespeople in the city.

     As smartphones become ubiquitous in China, there are more online real estate brokers and fees are being squeezed. Broker Iwjw.com charges 1%, Fang.com charges 0.5% and Zufangzi.com takes no commission at all.

     Total online closings in Beijing in June for Lianjia and 5i5j.com, both of which charge 2.7% and operate mainly out of brick-and-mortar stores, totaled 11,070, compared with 761 for Fang. com and Iwjw.com together. It appears that although online real estate transactions are slowly catching on, most buyers and sellers prefer companies with a presence in the physical world.

     In November 2014 Lianjia announced its entry into the financial industry, offering home loans to people who buy properties listed on its site. It is aiming for 20 billion yuan in transactions for 2015, and hopes to have its financial operations contribute 20% to total sales in the near future. The company is doing well in turbulent times and is worth keeping an eye on.

Kosuke Okame is a Shanghai-based business and market research consultant.

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