The future of real estate will depend on 3Rs – relief, restructuring and sustainability.

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With the huge and widespread role played by the industry, it is only natural that real estate tensions in India will have a cascading effect on an economy already stranded in the face of a second lockdown.

Indian real estate accounts for about 8% of national GDP. In 2017, the housing market alone was valued at $ 180 billion and is expected to reach $ 650 billion by 2025. In another 5 years, the industry will grow to $ 1 trillion. The importance of the industry is further underlined by the fact that a large part of the workforce (approximately 40 million people) is directly or indirectly dependent on the sector, and about 250 ancillary industries are associated with it.

With the huge and widespread role played by the industry, it is only natural that real estate tensions in India will have a cascading effect on an economy already stranded in the face of a second lockdown.

Indian real estate is currently in a state of stress and tension. While piles of unsold inventory have affected the morale of many developers over the years, the blockage whip has led to a brief halt in sales. The best side of the current circumstances, though, is that cases have dropped dramatically across most of India and an economic recovery is set to follow. The ratings agencies are optimistic about India’s outlook for fiscal 22, despite a softening stance on economic growth.

Meanwhile, government and industry bodies need to work in tandem and develop a sustainable plan. Overall, based on the 3R themes – Aid, Restructuring and Sustainability – a term originally coined by the World Bank, it is time for the industry and management agencies to work together to improve the health of real estate as well as the economy.

Industry assistance

An aid plan must be formulated for the industry, which must have not only political momentum, but also windows for restructuring loans in stressed and stuck projects. Reducing bad debts will not only give developers a respite, but also relieve financial institutions of the burden. The Indian government should also seek direct political support, such as lowering stamp duties and taxes on tax returns, to speed up sales. The industry has seen declines in stamp duties in some states such as Maharashtra and Karnataka spike sales in the past year. Direct incentives like these can truly be game-changing.

Meanwhile, the industry must take care of its employees, suppliers and provide them with financial security. Another important step is to take the initiative and offer vaccine packages to employees. At 360 Realtors, we have taken these steps in several of our offices. There is nothing more prudent than caring for the health of employees in a medical crisis of this magnitude.

Value chain restructuring

In the medium to long term, it is important to restructure the value chain through technology. Remaining humble over the past few years, Indian real estate has started to take over the online medium last year as the pandemic in its first release led to broader behavioral changes. Now it’s time to move to the next level.

The government and industry body must work together not only to drive technological innovation, but also to scale it up quickly. The latest technology should be developed and deployed through subsidies, rebates and other policy incentives, both in construction management and transactional cycles. This will help ensure consistent reverse and forward integration, strengthen unit economies, shorten construction cycles, and optimize overall production flow. Likewise, academic institutions also need to be associated with research and development (R&D).

In addition, the industry needs to rethink its product strategy and understand changes in consumer preferences. Demand is expected to grow in product categories such as rental homes, land plots, affordable apartments, living quarters and second homes. Industry players must adjust their strategy for new product categories. The government must also support these efforts through policy.

Finally, the mantra of victory is resilience.

While relief measures will provide respite, and restructuring will help adjust to new norms, the winning saga will focus primarily on one thing – how resilient we are in the face of the current crisis. Despite the fatigue caused by the pandemic, we must stay ahead of our game and work with continuous evolution.

There is no shortage of demand for housing in the country. Favorable socio-economic conditions, a young demographic, unprecedented rates of urbanization and improvements in infrastructure, as well as general income growth of the population will help the industry to move on an upward trajectory. However, to enter the market, we will need additional efforts at all levels – government, organization and individual.

Active sales and marketing planning at no additional cost is a must. It is necessary to implement new business strategies that can improve productivity, but at the same time contain CAPEX and OPEX. Franchises are a good option in this regard as they offer a lucrative platform for optimal resource allocation. Both the parent company and the franchises can expand into new market segments and generate more profits without overhead.

(Ankit Kansal, Founder and Managing Director of 360 Realtors)

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