1. Idiotic Assumptions :
Land is a limited resource – grab it before it diminishes. True that the length and breadth of land on earth is measurable and will not change. Little did one realize that there is a possibility to go vertical where sky is the limit.
Leveraging brought in the facility for people to invest and buy real estate by putting in small amount from their pocket.
“plot kharido flat kharido dukaan kharido kyonki real estate mae invest karne se dher paisa banta hai “.
People started investing left-right-centre with an idiotic assumption that you invest in real estate and it gives you big returns.
This resulted in inflation since the supply could not keep pace with demand in real estate.
The developer, financer, investor and customer started investing in industry most with a perspective of making money and remaining for self-use.
Developers started hoarding land with equity of NBFCs and PE funds and also private investors. Big lots of 50-100-200-300 acres.
“zameen bandh lo, fir nahi milegi “
Look at the same barren lands lying all across the length and breadth of the country – UNPRODUCTIVE. Yamuna Expressway, Dwarka Expressway are some areas where land was consolidated in large chunks by the developers and now the same land is a reason for the developers becoming insolvent. This further led to financial mess within the NBFC-PE space leading to defaults which are now not manageable.
An industry which is the second largest employer after agriculture and also contributes to the tune of 7 % in country’s GDP is in a massive stress and along with itself has put the financial-legal system and the customer in total pain.
Idiotic assumption of making idiotic returns from investing in real estate is the reason for blood bath in real estate today.
2. Idiotic Marketing :
The revenue generation mechanism(Sale Process System) involves 4 functions
Marketing essentially requires that the product is presented to the customer in the form and shape he can understand meaning that the customer sees that as a tool which will fulfil his need or desire.
However real estate marketing has taken a different tangent – Instead of talking about the product or its attributes it attempts to fool the customers mind by various ways some of which are listed below
a) GREEN’s: This word could not have been more exploited like it has been exploited by the real estate industry to capture a buyer’s mind. X-Greens Y-Greens and so on. Greens became a necessitated suffix to the project name. “More than 70 % area is open or green – this was a common spiel in the marketing communication “The buyer has now understood that this is not a USP or attribute of a project but it is the bylaws which regulate more than 70 % area to be kept open.
b) Schemes & Freebies: Buy a flat and fly to Dubai or buy a villa and fly to Canada. Free Mercedes with purchase of luxury villa and so on. Are we selling real estate or holiday or another asset? if there is room please reduce price – you have better chance to sell your property. Free wardrobes , modular kitchen , electronic gadget and accessories , free registry and free maintenance for a defined period are other tools developers are using to offload inventory – do these extras come free for the developer and if there is a cost then you are practically taking then better reduce the price or give an option take the freebies or the reduced price . Transparency with the customer will go a long way.
c) Payment Plans: This is absolutely a joke 10:90 or 15:85 or such other plans – pay 10% now and 90 % on possession. I have raised this with various developers that in times when cash flow and liquidity is the biggest problem plaguing the real estate industry how will developers construct with just 10 % payment and also cater for your other commitment like compliances, debt repayment, administrative and other expenses – NO ANSWERS. The customer will get stuck and so will the developer and financial institution. PLEASE DO NOT SELL PAYMENT PLANS – SELL YOUR INVENTORY
d) Real Estate as An Investment: Every developer markets ROI (Return on Investment) to sell his inventory.
If you buy at the start of the project your money will double on possession – this is a common spiel which the developer and the sales team use. I AM NOT SURE HOW WE ARRIVE AT THESE PREDICTIONS. If this was not enough, we started ASSUREED RETURN & LEASE GUARANTEE.
Keep confusing and fooling the customer.
A product which should sell at Rs 4000 / sqr ft is positioned at Rs 7000 / sqr ft with a lollipop of Assured Return and Lease Guarantee
My submission is if the product is right it will sell at Rs 4000 / sqr ft why are you taking a liability which is difficult to honour
Idiotic Marketing ideas did not help sell inventory leading to cash flow crisis.
3. Idiotic Data :
Two problems here:
– PRESENTATION OF DATA
Go to Google and ask what is the total housing shortage in India? you will find different figures starting from 20-to-25-to-30 million houses.
If an industrialist takes this as data point for making an investment decision, he will not find a better industry to invest in. And that is what happened in the last 2 decades – there was a noise in the market that there is an extreme shortage in housing and people started pouring in money.
The developers started consolidating land in urban region and planning and constructing 3-bedroom, 4-bedroom apartments. A glut of housing is created and we see dark buildings with less occupancy. All investors and only few end users.
Where did we go wrong?
The challenge is that the data maybe correct but the presentation of data is what matters. 90 % of the housing shortage of 20 to 30 million recorded is in EWS and Low-cost housing whereas the supply is in mid-segment housing.
Unfortunately, the industry which boasts of contributing to the tune of 7-8% to Indian GDP doesn’t have any legitimate trust worthy database which could table segment wise demand and supply be it commercial, retail, residential or industrial. In absence of data it is on developers hunch that the business decision is made which go right or wrong based on market sentiments.
We need to have a defined system of collecting data like we have a population register. The developers have to present correct inventory position so that a proper estimate of demand supply can be made based on which land can be made available. RERA is a superb attempt to capture inventory provided correct data is furnished by the developer.
Real Estate Industry needs to be more transparent at the top of the pyramid at the regulatory level to create researched databases which can be used by industrialist and financial institutions.
Idiotic Data has baffled each participant in this industry …