COVID-19: What has the real estate industry learnt from the pandemic?

[ecis2016.org] We look at some of the measures that real estate stakeholders have adopted, to survive the Coronavirus-induced slowdown and the lessons from this crisis that can help the sector in future

The Indian real estate market has changed drastically, following the Coronavirus pandemic. Nevertheless, there are varying degrees to which stakeholders have adapted or have been reluctant to adapt to the new normal. However, what cannot be argued with, is the fact that the market forces are clearly signaling a paradigm shift from the existing denial and resistance to change. In his bestseller change management book, ‘Who Moved My Cheese?’, Spencer Johnson leads the readers to one important conclusion: ‘If you do not change, you can become extinct’. In a market study involving industry stakeholders, Track2Realty tried to gauge the top lessons that the industry has learnt from the impact of COVID-19 on real estate.

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Technology is just an enabler

Proptech is the buzzword today, across real estate. However, what the sector needs to understand, is that technology is just an enabler and that no one is going to buy life’s costliest purchase over the click of a mouse. While artificial intelligence (AI), augmented reality (AR) and virtual tours (VT) may create initial interest, it does not necessarily substitute walk-ins before the final commitment from the buyer. If the visit to the project is not pleasant for the prospective buyers and the product does not come across as the right property in the right market and at the right price point, then, proptech cannot be a sales enabler on its own.

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Developers need to create their own product and brand differentiators

In a highly competitive market, the serious and seasoned players need to focus on creating their own product and brand differentiators, as customers are no longer lured by freebies and add-ons.

Buyers’ needs and preferences in a post-COVID-19 world

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Merely understanding the demographic profile and the earning capacity of buyers, is not enough. The sales force has to understand the psychographic profile of the buyers, as well. The average salaried-class buyers, who are more often than not over-leveraged when it comes to home buying, are now either reeling with salary cuts and/or job losses. The buyers in this market are the ones that have greater financial stability or are immune to the slowdown. Hence, their choices, concerns and the bargaining power, are highly under-rated by the market.

Communication strategies need to be transparent and meaningful

An average builder does not have the liberty of choice anymore, as far as the marketing budget is concerned. With many real estate publications either closed or on the verge of closure, developers cannot afford to simply glorify their own project or brand. Instead, they need to be transparent and stick to the point, with little or no room of being contradicted and/or caught on the wrong foot. Quality of media exposure and content, rather than quantity, will lead to better ROI (return on investment).

Financial closure of the project will be crucial for survival

Not every developer in the Indian property market can afford to adopt the build and sell model. Nevertheless, in future, launching projects with little internal accruals and banking on the buyers’ receivables, could lead to disaster. Financial closure of the project is now crucial, to stay afloat in the real estate business.

Urban sprawl versus developments concentrated around the city centre

For long, the top 10 cities of India have witnessed developments that have been heavily concentrated in and around the CBDs (central business districts). The time has now come, for the market to evaluate wherever infrastructure development should be such that it allows for the creation of urban sprawls, rather than concentrated developments around the city centre.

Wellness to play a key role in project design

Irrespective of whether work-from-home will remain a reality in the long term, developers need to think of design innovations, not just in terms of the additional study/office room in apartments but also from the perspective of holistic living and integrating the concept of wellness.

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Affordable housing may be redefined

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The demands and aspirations, ranging from amenities, innovations and work-from-home to wellness, remain the same across housing segments. Consequently geographical boundaries need to be redefined. Instead of inviting consumers’ backlash by building affordable homes near city centres, it would be better to offer better products and amenities at peripheral locations, where pressure on profit margin can be compensated for with lower land values.

How have developers adapted to the COVID-19 crisis

JC Sharma, VC and MD of Sobha Limited admits that the COVID-19 crisis forced developers to learn many things afresh. Our focus on self-reliance helped us with cash flows and stability for the company, as capex requirement is minimised, he says. “We paid full basic wages to our skilled workers during the lockdown and provided food to thousands of workers who had come to us through contractors. We managed to reduce certain costs, which were fixed in nature. We had to understand the cost overhead that we took for granted and rework upon it. During the lockdown we could manage our fixed cost with our internal cash flows. So, there has been greater understanding about the business, as compared to the pre-COVID-19 period,” says Sharma.

Amit Modi, director of ABA Corp, admits that the biggest learning for him has been to minimise the business risk and have better financial planning. According to him, focus on wellness and customising projects with work-from-home in mind, are the way forward.

Deepak Goradia, vice-chairman and managing director of Dosti Realty also believes that the crisis has managed to reaffirm a basic principle: ‘expect the unexpected’. He maintains that there will be new demands, arising from the experiences gained during these challenging times. The gated community culture will gain importance and residents will prefer to live in areas that offer better potential for growth in the residential segment. “Technological advancements like virtual site visits, will enable prospective buyers to do the site visits virtually. This is likely to be popular among NRI buyers. Organised retail is likely to flourish and people are likely to trust stores in their vicinity, for their necessities. People will like to reside in developments, which will offer them the best of amenities, with basic facilities easily available nearby,” he concludes.

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(The writer is CEO, Track2Realty)

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