Riding the surge of disruptions: Real Estate poised for growth
New trends are shaping Indian real estate environment. In response the developers too are redefining their portfolios and business models to align with the new market dynamics.
Text: Sapna Srivastava
The year 2018 was of caution and of assimilating the changing regulations and financial crisis. Real estate is a game of passion and patience. The developers while facing challenges of piling inventories and keeping their under construction projects on schedule have also managed to mitigate their challenges and survive the rough times by strategically adapting to new trends.
The governments ‘Housing for all” mission and sops for developers and homebuyers has made affordable housing the most attractive segment for developers to invest. And going by the increasing number of projects launched last year the year 2019 will see a tremendous growth in this segment. There is a huge latent demand for low and mid-income housing. The developers that have managed the working model and margin calculations; they have been able to reap profits.
Regulatory stability has opened up the avenues of warehousing in industrial hubs offering brighter prospects to the developers as there is already more institutional capital flowing into this sector. Large global funds and looking at deploying long-term capital to this sector and consumer funds are gradually flowing into the market. Commercial real estate too is undergoing changes and developers are taking notice of the new trend. They are developing new commercial real estate models addressing the demand from booming IT & BFSI sector.
The globalization has worked in favour of Indian developers in terms of tying up with international real estate developers to develop projects in India as well as foraying in global cities to tap the local and NRI population. This trend particularly shows the growing maturity of Indian developers.
Developers are building their brands to position themselves for various customer types. There is a changeover from a transaction-based approach to a relationship-based one. Encouraged by the growing customer confidence because of RERA and investor interest due to implementation of GST, developers are foraying in newer territories and diversifying their portfolios.
While exploring financial models, private developers are turning towards going public to raise the good amount of liquidity. Developers are going public launching an IPO (initial public offering) which is new for the industry. In the forthcoming year, real estate assets will be an excellent option to hedge against volatility in the equity markets with investing in prime cities like Mumbai to be the safest bet. Also read http://realtyplusmag.com/the-changing-landscape-of-indian-real-estate-in-2019/
Apart from the established names of the industry, relatively new developers too are creating ripples with their projects and business models. Rental & leasing model is one of the new facets being adopted to address the needs of millennial and mid-sized businesses. Technology has become the greatest driver in this segment. Developers are also rethinking residential space and altering their product offerings accordingly to market demands. ‘Smart homes’, ‘affordable luxury’ have become the buzzword. Tier-II cities have become the new playing field of established players as well as newbies.
The Indian real estate market is starting to witness a substantial shift
- Emerging competitive forces giving rise to distinct business models are forcing developers to focus on sustainable growth. Developers getting more professional are defining their priority areas, assessing their core competencies across the value chain and reconsidering the operating models in different marketplaces.
- Given the current complex market and region-specific regulations developers are actively managing risk through both internal and external processes. The emphasis is on driving efficiencies in process execution, construction and post-handover.
- The tectonic shift in the Indian real estate market with increased taxes and compliance costs has meant that while sales numbers may be increasing but developer margins are getting lower than before. Not surprisingly, now businesses focus is on tight cash management by project and cash flow return on investment.
- Increase in customer awareness is the major reason for developers tailoring their brands from pricing and payment and creating strong product and brand strategies to match target customer preferences.
- As inventory levels remain high, selling properties has become increasingly challenging. To reach customers, developers have begun to employ integrated, multichannel go-to-market (GTM) strategies that include direct sales, customer referrals, international initiatives and more.