China’s biggest banks have turned themselves into online platforms for real estate, connecting websites and other digital experiences to rentals and loans.
But now Bank of China is hoping to up the ante by using virtual reality to sell flats – and boost its mortgage business.
The emphasis on selling apartments comes at a time when the national real-estate market faces a slump due to overcapacity and a slowing economy.
Indeed, the thrust for the past year or so has been to support the rental market, which is in line with the government’s objective to cool an overheated market and provide more stable, affordable housing to the middle classes.
China Construction Bank has been the leader in terms of creating digital platforms for renting properties. Rising home prices have contributed to growing inequality, as wealthy people snap up more apartments to flip them, pricing poorer people out of new housing.
In late 2017 the bank introduced “CCB Home” in Shenzhen, creating its own brand of flats in partnership with 11 real-estate developers, all for renting online via CCB’s portal. The business is meant to take advantage of demand for rentals while also revitalizing vacant properties, both of which are in line with government objectives. Developers get cash up front on contracts up to 10 years, while renters enjoy stability.
CCB, meanwhile, offers loans up to Rmb1 million with maturities as long as 10 years. It charges interest of 3.96% for a one- to three-year mortgage, lower than the market rate for mortgaging apartments.
Since then, CCB has expanded this model to cities including Beijing, Guangzhou, and has launched a mobile app. It works with fintechs such as Bestsign to provide electronic signatures and other features that digitize the entire renting process.
Other banks have joined this trend to offer rental loans, both for renters and owners. , including China Merchants Bank, Shanghai Pudong Development Bank and Ping An Bank – although last year, Ping An Bank folded its rental app due to too many defaults. Some rental platforms use very high capital leverage to acquire new apartments and the business goes from boom to bust.
But BoC’s new virtual-reality initiative is using digital technology to keep the wheels turning on the mortgage market.
The platform itself is not profitable
Bank of China is piloting an online platform called BoC VR+. The pilot launched in Suzhou last month. As the first step, BoC is now collaborating with real-estate developer Vanke’s current projects for sale in the city.
Fei Yin Kang, head of the personal banking department of BOC’s Suzhou branch, says his team take a dozen of 360-degree photos of each apartment to show all the details, including the view and the residential environment. Users can click on the photos to move around the property virtually.
“The page view statistics are good,” said Fei. “But the market is quiet before Chinese new year, so we don’t see real transactions on the platform yet.”
If a potential buyer is interested in a specific apartment, he can directly contact the sales agency through BoC’s website. BoC loan officers can provide immediate information regarding whether the buyer is qualified and at what lending terms – valuable information, as government rules frequently change, forcing banks to adjust their offerings.
“Usually a buyer contacts the bank only after he has talked with the agency and has visited the apartment,” Fei said, “Now he can have the bank’s mortgage info from the very beginning and then decide whether to visit a specific apartment.”
Fei’s team is working to add car-hailing services such as Didi Chuxing to the platform. The upcoming feature means that with a simple click, the driver arrives at a scheduled time to pick up the client and deliver him to the apartment.
In fact, BoC announced in December its own leasing platform and became the second Chinese bank to enter this market. Fei says that online platforms have changed the property sale and rental services.
“No matter it’s China Construction Bank or Bank of China, we don’t earn agency fee. We make the profit from the financing service we offer. The platform itself is not profitable,” he said.
The technology means banks don’t have to simply sit back and wait for customers to ask for a mortgage or a loan. They step out to acquire customers with their own platform to give additional service.
But the platform remains bank-centric. BoC’s platform is a closed, proprietary shop, so it is vulnerable to competitors coming up with their own V.R. offers...and to the risk of a property market bust.
BoC intends to broaden VR+ to include selling cars and jewellery: Audi and Porsche will be the first two brands available on the platform (with BoC extending a consumer loan if need be). For jewellery, buyers can take a selfie and see themselves wearing the baubles, and then buy it.