Corporate values in real estate? I am not intoxicated…
Ask any real estate customer in India and they will probably state confidently that ‘values’ and Indian real estate are at the very extremes of an antithesis. The real estate space in India is considered to be family owned, opaque and seller dominated. Synonyms of the words ranging from ‘avaricious’ to outright ‘rapacious’ might be used to describe real estate developers. Having been a customer for over 2 decades and having dealt with several developers across Mumbai, Kolkata and the National Capital Region, I too have carried various shades of the same impression.
Over the last 2 odd years, however, I have had the opportunity to come ‘face to face’ with ‘the other side of the coin’ during my association with a real estate organisationas an Advisor. During this engagement, I have had the opportunity to get extensively involved with issues both at a strategic and tactical level and in particular client relationships quite extensively. The primary learning has been that, as for all things, there are always multiple perspectives and I felt it would be patently unfair if I did not express the other viewpoint – having been a witness to it.
This engagement has opened the doors to a better insight into more information and the thought process within the organisation and I have emerged with what I would describe as balanced opinion:
• First and foremost – customers are justified in carrying several of the adverse impressions against many of the developers. Many developers have used the space as a ‘get rich quick’ strategy leveraging on the opaqueness and low element of accountability that was intrinsic to this space
• Having said the above, it is also not fair to use the same brush to paint the entire canvas – there are those who are different and many others striving to be different
• While social media needs to be complemented for creating hyper awareness and hence greater accountability and transparency, it is also being abused for some amount of unnecessary hyper activism and exert pressure (by a few speculators) upon developers to seek an exit from loss making positions
• In many cases customer avarice has been the primary factor in their undertaking a purchase which they neither had the intent nor the financial strength to pay
Having said all of the above, there is no doubt that there are several ‘black sheep’ whose customers have been the victims of the excesses of the developer community.
Having worked with international banks, in India and overseas, for over 2 decades,(with the stringent country level regulatory oversight with transparency of rules), I realized that real estate was vastly different. It had a significant provincial & local oversight with multiple regulatory authorities. In some sense, the complexity that is embedded into the sector has also resulted into the customer impression about the sector. The bureaucracy and subjectivity in interpretation leaves large spaces of greys.
Some of the myths that I had heard also got challenged through the reality that I experienced:
Myths and Reality
Myth: The intent of the developer is always to maximize the profits at the cost of the customer
Reality: I was party to some very emotionally charged discussions wherein the merits of undertaking enhancements to the project without charging the customer were being discussed. The discussion was with regards to the thickness of curbstone – the characterless stones that we see by the sides of the road. A greater thickness increases the cost significantly but enhances the life to 30 years from 5 years. While one school of thought considered them to be unnecessary, ‘against market practice” since it was neither ‘visible’ nor ‘experienced’ by the customer. The 30 year life proponent finally prevailed!
Myth: The Apartment Buyer’s Agreement is a complex and one sided document
Reality: I too have always believed in the above till a few months back I had the opportunity to accompany a friend in Singapore for their purchase of a London property. The developer had selected a lawyer who was to be paid for by the client and was supposed to explain the risks embedded in the purchase decision! I could not imagine a situation which was riper for a ‘conflict of interest’ than this. Anyway upon questioning them on the risks, I learnt the following:
• The ABA itself was at least 5 times thicker than the ones I have seen in India and hence necessarily needed a lawyer to explain, whose substantial fee was being paid by the customer!
• The development was to take about 7 years and could take up to 9 years WITHOUT payment of any penal charges
• There was no refund of monies in case the developer delivered an area which was up to 5% less than what had been paid for
• The apartment could not be sold till 25% of the amounts had been paid
There were many other similar clauses which left me feeling that India was ‘nirvana’ when it came to the ABA. Having said that, I do believe that 2 wrongs do not make a ‘right’. With the promulgation of the Real Estate Regulatory Act 2015, there shall be a substantial standardization of the ABA.
Myth: Indian real estate follows a completely a supplier driven approach
Reality: While that may have been the case previously, currently there is a race amongst the developer community to create a ‘responsive’ organisation. This particular organization that I am involved with has graduated from a reactive and transactional CRM (Customer Relationship Management) nomenclature approach to a more proactive, life cycle based CE (Customer Experience) approach. This was not just a rechristening but actually a transformational approach to create a deeper engagement with the client over the long lifecycle that is quite typical of real estate.
Myth: Real estate does attracts few professionals from premier educational institutions
Reality: The organisation that I am associated with has graduates from the Wharton Business School, Stanford University, the IIMs, IITs and NITs. Having interacted with professionals from across the globe, I could vouch that they could stand up to global organisations in most parts of the world.
Creation of a values framework:
An action that super cedes all of the above is the adoption of the values framework that this organization hasundertaken. What started as discussions on strategy to create a differentiating proposition in the real estate space ended up in the organisation creating AND implementing a values framework – without any external assistance?
During the numerous strategy debates that were undertaken amongst the senior team (disclaimer – the author was a part of the group), it emerged that one of the key drivers of sustainable and non-replicable competitive advantage would be the employees themselves and a guiding values framework that the whole organisation should follow.
There were a few members who did not fully understand the import of this major initiative. However, it was made abundantly clear by the Chairman and the Vice Chairman that the exercise entailed creating a framework but more importantly getting all the employees to believe in it and embed it in their day to day practices. It was not about placing a vision statement at the reception of the organisation, but as a guiding principle for every action of each employee.
The most interesting (and also challenging part) about a values framework is the determination, definition and description of the values – especially if this is an internal exercise, as was in this case. Like any other group, there shall always be some persons who shall be more forceful by virtue of their eloquence or their position in the hierarchy – but not necessarily correct. On the other hand, there would be participants who have a solid set of ideas but happy to be by-standers and need to be actively engaged to get them to express themselves. Surprisingly, democracy prevailed and each one got the right to say what they wanted to. Of the 15 odd values that were proposed, the selection was narrowed to a set of 8 – which is a bit on the higher side but then better than none. A senior management person was nominated to the champion for each value.
How this impacts stakeholders especially customers:
With a values framework one of the toughest elements and where most organisations fail, is in the implementation. Just awareness of values is not good enough. It is about living them on a day to day basis. Values are not something new to each individual in their day to day life. Our parents gave them to us and we are giving our children. It is not that they remember each and every value that we gave them off hand. It is more about their abilityto judge right and wrong when faced with a situation where a value is tested.
Having worked for over a decade with an organisation with a deeply embedded values based work culture, I can vouch that such organisations have a deep embedded empathy and concern for the client. Their commitment to their clients is neither symbolic nor lip-service but it is a deeply entrenched in the work ethic and there is true commitment to the client. Every single action, is judged on the basis of the values and if found to be in even minor conflict with the values, is discarded – irrespective of the profit potential.
People are hired and fired based on their belief, subscription and demonstration of the values – performance and merit comes second. These organisations, by virtue of the consistency in each successive action of their employees, are able to convey this work ethic to their customers. This conveyance is not overt, however through actions.
Since the adoption of the values framework, this real estate organisation has already started actively imbibing this spirit. I attended a meeting between the CEO and some very angry customers who doubted the intent behind every action of this organisation. The CEO in the highest spirit of transparency offered to share the minutes of the weekly internal meeting relating to the project and offered to send his representative with those minutes to the monthly meeting that the customers were having. This completely transformed what was perceived to be an adversarial relationship.
Another instance where the values based approach resulted into a substantial savings for the clients was when the same CEO was discussing the requirement of a large commercial floor space by a large MNC bank. While the bank made their requirement in terms of floor space in square feet, the CEO actually told them to list down their requirement in terms of workstations and the size of each. Through innovative design, he was able to reduce the total saleable area to the client by 50% as against what was being offered by other developers.
These are just 2 of the many examples where this organisation is challenging the status quo in this antagonistic bordering on combative relationship.
‘Naveen Gupta has been with international banks in India and Singapore for over 2 decades and is now an advisor to a large and prominent real estate organisation in the NCR’.