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Developers in India 79

Sanjeev Kathuria(Founder, Author & CEO at Torbit Consulting) - August 16, 2020 - - 0 |
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Developers in India 79

In episode 1, we discussed on the flow chart of how to judiciously and efficiently plan to develop a region.

TIME ADHERENCE whether it is in planning or executing the policy framework, zoning or setting up of physical and social infrastructure is of utmost importance. Minimum compliances and Single window clearance are a must for the Developer.

The developer plays a major role in creating physical infrastructure, setting up the industry – business and finally social infrastructure of which housing is an essential element

Let’s look deep inside the best practices a developer can adopt to scale his business and not get trapped into default.

1.FEASIBILITY CHECK: Developers must consider a project after studying the demand-supply scenario of the region. Absorption is key to revenue generation thereby leading to the feasibility of the project hence this should be the starting step in taking up the project. Govt planning and policies create the ecosystem for business development, employment generation leading to consumption.

2.FINANCIAL CAPABILITY: The next important step in taking up the development of a project is financial ability. The Developer must consider the size and scale of investment, the sourcing should be aligned and the ways to settle the financial obligation in the lifetime of the project should be clearly detailed in advance. Debt sourcing is an essential element as no business can grow without debt but the size of the debt should be such that during the project’s execution(lifetime) it should be possible to payback in tranches and by the completion of the project the debt should have been cleared. There should be enough juice in the project to take care of the cost of the debt(interest) and yet make a meaningful profit for the promoter, investor, and other stakeholders. Cash Flow management and time to time audit of financial liability is a must. (The stress in the real estate industry today is more for the reason that the cash flow from the project is neither sufficient to execute-complete the project nor to fulfill financial obligation)

3.EXECUTION CAPABILITY: Developer must take up only that much work that could be executed in time. Execution requires proper equipment tool machinery infrastructure to manage the development. Along with this, the Execution team must have knowledge – Experience to handle not only the development but also to handle the team committing itself to the project. Leadership ability defines execution capability.

4. HUMAN RESOURCE CAPABILITY: Developer must put in place a proper capable team structure to undertake a project be it finances to planning, sales to CRM, procurement to audit, and but of course employee management. The organization is nothing but people – a capable team is a mantra to the success of the business. There is a big challenge in our country which is that we still work in a conventional way, meaning the entrepreneur is the man who takes all decisions – the capable team even if it is created is not allowed to put their views. The growth of the team is restricted to a level above which the owner gets his own family, friends or partners to take the decision-making roles. CORPORATE GOVERNANCE is the need of the hour. Unfortunately, in our industry, there are very few companies that follow corporate governance and compliance. DEAR DEVELOPERS, High time to correct our work.

5. VISION & MISSION: This is important not only for the developer but for any business person (referring to the developer here). The developer must share the organization’s vision and mission with the team. He has to make sure that the team is in a complete sink on a mission and that all are together on the journey to do it. The developer must share an HONEST report of assets and liabilities of the organization with the team & all other stakeholders. The Management team should have a practical scalable growth plan which doesn’t at any time risk the employee, the investor, or the consumer.

The current crisis in the real estate industry has created an opportunity for the developer to relook at the planning & execution process to evaluate what went wrong. The mistakes have been various of nature and the only way to correct them is to get through a thoughtful restructuring of present working. The real estate industry has created stress not only for the developer but also for other stakeholders like financial institutions, banks, consumers, vendors, and surely for employees. Where did the developer go wrong???

The developer went wrong on the following accounts –

1. Proper demand and supply surveys are not there as a part of the planning of launch. This leads to Create an excess inventory/supply than the requirement.

2. Went overboard taking debt for expansion and since the inflation in the sector was restricted with the economy being sluggish and consumption taking a hit, the revenue generation took a hit which led to a cash flow crisis. Due to the cash crisis, there were not enough funds available to complete the project or honor financial commitments. This has led to a series of defaults and hence we see lots of crises in the industry.

3. With the growth of the size of the business, and execution capability did not increase within the same proportion to meet the required stage.

4. The company resource structure got mishandled because of the increased strength of the workforce and inability by the developer to keep up a proper happiness quotient within employees.

5. The developer kept working in a conventional mode where he missed on brought in professionalism and corporate governance.

Dear developers, I have just put down my experience and learnings together so that we can dwell over it and smoother our future assignments. Best Practices for Developers can ensure a more mature more professional more responsible organization. This is the need of the hour.

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