Insights from Mr.Niranjan Reddy, CEO WeOwn
Real estate successes and failures have perennially been measured in numbers. From data on property price increase through the years, sources of capital funding the sector’s growth, to asset class yields and appreciating price trends. Numbers and their trajectory have marked the rise and fall of the industry.
Indian real estate has especially witnessed significant upheavals in the last decade alone. From a bullish 2007 to a sluggish 2017, demonetization shocks, GST aftershocks, uncertainty around RERA, followed by the Covid affected slump, there has been an unpredictability that the industry is grappling with and finding a way out of.
Our journey of the last decade has been about closely observing the changes, watching the trends, finding unique ways to tackle on-the-ground problems, perfecting the pitch, leveraging storytelling for faster and profitable sales; and partnering with builders to manage the end-to-end of their marketing journeys. But most of all, and most interesting of it, has been listening to home buyers across cities.
Condensed below are a few observations of WeOwn‘s CEO Niranjan.Reddy summarizing his experience of the residential real estate industry, gaps and challenges that are hampering its growth and how it can be restructured to be better, sharper, technologically advanced in keeping with changing times, thus keeping buyers and sellers satisfied.
1. Customers come first. Every time.
When it comes to property, we are often immersed in the details and specifics, land acquisition and project deliverables, amenities we can provide and how to optimize space to do the maximum possible within limitations. What we often fail to factor or achieve at the end, is customer satisfaction. Over time through varied experiences in our work, we have realized the gaps in aligning efficiency metrics and customer satisfaction indices; and how the two must come together to ensure sales and marketing achieve their purpose – of keeping all stakeholders happy.
Unlike other industries like hospitality or automobiles, we don’t touch base with existing customers often, and most of the time when we do, it is to collect money. They are our most important marketers, and yet we do not address their pending issues satisfactorily or follow up post-sales to ensure promises made align with our deliverables. Despite the big investments homebuyers make in the realty sector, this disconnection with end customers often leads to an overall feeling of dissatisfaction despite the time, efforts and money spent on completing projects within timeframes.
2. Excessive reliance on intuition is detrimental to growth
As Indians, we are very intuitive. We make some of the smallest and largest decisions based on our gut instincts. While structured project management tools and decision support software is often used in Tier-1 Builders, the bulk of decision making in Tier 2 & 3 city builders still rely on gut feeling rather than hard data.
For example, while selecting a parcel of land (which in itself is a task) and figuring out what to build on it, there is rarely any scientific profiling of the kind of customers who would want to live there. Instead, this decision to purchase land is often made in consultation with industry peers or on the recommendation of other professionals. This quick decision is compelled by the rush to pick up a good piece of land before others do OR lack of projects in hand which clouds judgement OR availability of excessive capital which needs to be spent on the first plot available.
3. Don’t only rely on learning from Family or Peers
In real estate, learning is usually through experience and expertise, often passed down from family or peers in the industry.
Ironically, while an Architect or a Structural Engineer has prescribed courses, there is no real qualification to become a Builder.
Even today, the bulk of learning in real estate is experiential. A new incumbent Builder often buddies up with a more senior/ experienced peer to ‘learn’ the trade. This is both slow and very expensive. More importantly, it does not encourage new learning which won’t work in today’s volatile real estate market.
It takes years, if not decades to understand structuring a real estate business, often at the cost of large losses and unfortunately while experimenting with customers especially in the initial projects. This does not create good experiences and can hurt reputations, resulting in customer losses with impacts lasting many years.
For the industry to scale with structure, it needs business best practices and structures put into place, all driven by process excellence, innovation, MIS like modules that can be taught and implemented by new age industry practitioners.
4. Learn the art of Brand Building
Real estate is excessively focused on sales – how to sell the project, where to sell it, what to include in it – that businesses often forget that building their brand is especially important. Differentiating themselves from other peers and competitors, helps create a brand persona that customers can identify with.
Building a brand persona for the business has several advantages, a few of which include – establishing a unique identity, building trust and conveying values, and showcasing the scope of projects done during the business’ lifetime. This also puts forth the brand ideology both online and offline, and helps in consumer connection.
Building a brand ensures survival of the business in the longterm, especially when markets are done or the business is going through upheaval as happened with Covid. On the upside, there is plenty of premium – trust, profitability and opportunities – attached to building a brand.
5. Understand ‘Project Management’, the nuts and bolts of a business
Project Management is one of the basic foundations of building a scalable, sustainable, growing business. Without it, Builders do not have the pulse of the project, are not sure what’s happening in their business, are unaware of escalating costs, or project timelines. For example, ‘back of the envelope arbitary cost’ may lead to a very different “per sqft.” cost of construction, then what actually is actually the case on-ground.
In the manufacturing or automobile industry for instance, there is real-time process flow predictability about when the next product/parts will be shipped out of the factory. In the real estate industry, site engineers are sometimes given the ‘additional task’ of Project Management. They do not have the insights or acumen to observe the entirety of the project and stay on top of all the tasks and quality parameters at all times. This notwithstanding, no proper business continuity plan can survive with periodic unavailability of labor, unforeseen cost escalations, inordinate approval delays, and more, which eventually eats into overall business profitability.
In conclusion, our experience in the real estate industry has shown us that resilient builders can,
- Overcome towering challenges in making projects possible despite fluctuating market conditions.
- Power on through extraordinary market turbulence, unforeseen challenges and unreliable industry structures
- Deliver on project timelines despite constantly changing industry rules and regulations.
There is a definite method to the madness that has kept the industry chugging along all this while, despite all the physical, financial and structural roadblocks. However, a lack of evolved processes, structured approach and professional practices, and lack of data-backed decisions is causing real estate to lag behind when compared to other leading industries.
Therefore, while the economics of scale are easy to understand and implement, the bottomline is that there is much to be achieved when it comes to scalability, profitability, standardization of best practices and brand building, which can transform the functioning of the industry as seen today.
While we have identified the shortcomings and challenges of this complex industry and the old architecture within which it functions, we now need to figure out ways of transforming it, pushing through with innovative ideas, bringing together online/offline methods to kickstart the transformation.
In our next writeup we outline best practices undertaken by WeOwn to make some of this possible.