Developers in India are trying to maximize sales through referrals. However, not only does this strategy not work for all the segments; it also may create artificial communities
One of the most effective sales tools available in the Indian real estate sector, is word-of-mouth publicity. Consequently, developers are trying their best to create ‘artificially induced neighbourhoods’, for communities, professionals and other like-minded groups, to sell their inventory through referral marketing. However, the challenge for builders, lies in creating a pool of buyers that have a similar demographic profile and financial standing, and also ensuring that each buyer in the social circle has adequate privacy in the project.
Living close to friends can also strain relationships, points out Archana Dalmiya, a communication professional in Delhi. “Do you want your friend living downstairs? Maybe not. My home is a place, where I need my privacy. I would not like to have my friends invading into my private moments. Moreover, if the friendship sours, the future could hold countless uncomfortable encounters in the neighbourhood. Too much familiarity, is not good for any relationship,” she cautions.
Nevertheless, there are many home owners, who bond closely with their neighbours over the years, thereby, turning apartment buildings into de-facto neighbourhoods. This has given rise to a trend, where home buyers often opt for new houses, and also bring members of their peer group to the same building, without paying too much attention to privacy concerns.
It seems like we are going back to an older style of living, feels Nopur Nritya, a documentary film-maker who works for an NGO in Bengaluru. “Socialising does not mean that one has to invite the social circle to one’s home. With cut-throat competition, if not rivalry, in today’s professional world, no one would like to carry the office back to their neighbourhood. Weekends are meant to unwind and not stress out with same set of people,” Nritya asserts.
Tapping into word-of-mouth publicity
AS Sivaramakrishnan, head – residential services, CBRE South Asia, maintains that word-of-mouth publicity can do wonders for a developer, in an unorganised business like real estate. However, it has to be handled well, as it also has the potential to ruin a developer’s image. According to Sivaramakrishnan, referrals account for around 30% of the sales. Hence, the marketing budget should also take into account methods to please the existing buyers. Assessing the impact of word-of-mouth marketing, depends on how you look at the goodwill factor, he explains. “Direct recommendation of existing home buyers, often works in the affordable and mid-segment housing. However, in the ultra-luxury and premium housing segments, endorsements by celebrities who have booked units in the project, work better for the developer,” explains Sivaramakrishnan.
Developers nowadays, often rely on market research, to evolve strategies that can attract people from similar social profiles, to invest in their housing projects. Entry of the right target group during the initial phase of a project, does attract similar gentry at subsequent stages. A painting exhibition, car show, book release, yacht party, etc., which showcase a product offering, and may be followed by a cocktail and dinner, are some formats that are commonly used to encourage networking, and spread word-of-mouth publicity. Developers too, can leverage such social gatherings, events and functions and add a marketing flavour to it.
However, word-of-mouth publicity can be a double-edged sword. Moreover, it has achieved little success in the luxury segment, owing to the high price tag of units, and privacy concerns over one’s lifestyle and amount of investment. Word-of-mouth marketing therefore, is still at a very nascent stage in the Indian real estate market, with developers experimenting and learning on a trial-and-error basis.
Top Investment Destinations In Asia-Pacific Include Mumbai, Bengaluru and Delhi
Since the Indian investment policy for the real estate sector has got a thumbs up from the foreign investors the country has regained favour as a preferred investment destination in the Asia Pacific region.
According to the Emerging Trends in Real Estate Asia Pacific 2018 report Mumbai, Bengaluru, and New Delhi ranked 12, 15 and 20 by survey respondents as top investment cities. The report was jointly published by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI).
Globally Sydney, Melbourne, Singapore, Shanghai and Ho Chi Minh City were the top investment cities.
The report also said that due to the implementation of GST and last year’s demonetisation liquidity issued have been created for real estate and it has also impacted investment and development prospects of the cities, thereby pulling down their rankings.
Mumbai has been ranked 12th after being on the second spot last year, while it ranked 8th in terms of development prospects. Bengaluru and New Delhi stand at 15th and 20th position respectively in the investment destination ranking against 1 and 13 respectively in the last year. They ranked 16th and 18th positions respectively on the development destination ranking.
According to the report Mumbai has benefitted from the recent strength of India’s capital markets. Absorption has therefore been strong, driven by demand in co-working, manufacturing, and services companies. Retail is another sector that is drawing increasing foreign investment interest.
Although steadily declining, Mumbai’s office vacancy rate (at around 17 percent) continues to be very high, and with a pipeline of incoming supply totalling about 40 percent of existing stock, fundamentals would appear to be negative. In reality, however, Mumbai continues to lag behind in term of Grade-A stock, meaning that any new supply is quickly taken up and that rental growth for those properties remains strong, says the report.
The city is emerging as the business process outsourcing (BPO) in India. The early foreign investors in this sector bought income-producing assets in business parks along with local partners and benefitted greatly. Some of these assets have now been earmarked for sale, in particular via India’s newly emerging REIT sector, which is expected to launch its first IPO in the first quarter of 2018.
8 to 9 percent annually, together with healthy new tenant demand rental growth has been reported by operators of BPO facilities. However, with the emergence of automation and artificial intelligence technologies the BPO industry is tapering off.
As compared to other Indian cities, New Delhi remains unpopular with investors. According to the report this is mainly due to a downtrend in development of residential sector.
Even though this has created a chance to supply bridging finance, there are not many foreigners who have shown interest in it. The report suggests that north Indian developers tend to be overleveraged and often hold portfolios of high-end housing which is in oversupply. Thus many projects have faced delays and some developers have acquired a poor reputation.
Nonetheless there is a big potential the moment the markets turn. Report points, Delhi will be one of the first cities to start seeing a pickup.
According to JLL Delhi missed its opportunity to grab a share of the surging growth seen in business parks located in the south. Even though there was recent demand from IT companies, uptake overall has been slow, leaving office vacancies at an elevated 30 percent. Thus it lacks when it comes to absorption however rentals have still been holding firm unlike the lower vacancies and higher rentals in Mumbai.
India is the only country to provide long-term sustainable 3 to 5 percent rental growth profile over a long period. Investors identified India among others as a destination where data centres are projected to provide 13 to 15 percent IRR.
Investors are interested about affordable housing as an asset class even though supply of affordable homes increased in last 3 quarters. The report says the important reason being availability of land at affordable price and not so far away from the cities, no single window approvals, and time overruns etc.
India continues to attract strong flows of institutional and sovereign wealth type capital suggests the report. It adds, investment in India offer massive scale opportunity and continues to be strategic in nature. Also, most international investors in India prefer commercial property, with cap rates currently averaging in the range of 8.5 percent to 8.75 percent.
Mostly due to tax reforms, India logistics sector has recently been the target of an investment boom. The average appreciation in rentals has been anything between 8 to 10 percent per annum, higher as compared to office space, growing 5 to 7 percent.
The residential properties, due to demonetisation campaign, GST and increased regulation of real estate development practices, continue to suffer. High-end residential oversupply is another ongoing problem. India remains the real bright spot for new REIT markets.
Almost 52 Percent Of Residential Units Registered Under MahaRERA Remain Unsold: Report
According to a report, 350,000 units remain unsold out of the total number of units that were registered under MahaRERA leading to an inventory overhang of 52 percent as of August end.
The joint report from Cushman & Wakefield and Propstack said with over 50 percent of the current residential inventory remaining unsold and slow momentum of the new launches, the prices have been largely stable.
An estimated 670,339 units across 5,620 projects have been registered under MahaRERA including residential and residential cum commercial under-construction projects. These projects cover 506 million sq ft of development.
Looking at MMR in areas beyond Thane, maximum numbers of projects were launched and registrations done under MahaRERA at 1,835 projects constituting 33 percent of total projects registered.
Gautam Saraf, MD, Mumbai, Cushman & Wakefield said, “Availability of land at the lower prices is a crucial parameter that allows developers to keep the per unit prices under check. Maximum end-users are value sensitive and would like to get maximum benefits out of their purchases. Locations beyond Thane allow developers to create homes that deliver value beyond just habitat. These areas are well connected through public transport including suburban rail and roads, and give developers the confidence to launch large-scale projects in these areas”.
The stretch from Bandra to Borivali on the Western Suburb saw 1,400 projects making up 25 percent of the total registrations. The rest of the table was completed by Eastern Suburbs (18%), Navi Mumbai (12%) Thane (7%), and South Mumbai (5%).
1 and 2BHK configuration units estimated at 319,000 had the highest share of sales constituting together of 87percent. 3BHK configurations sales made up 11percent, while even higher configurations were a mere 1percent of the total inventory sold.
Due to the high real estate prices in MMR region, the end-users’ affinity has been towards smaller configurations. The report added, even while the capital values of affordable houses across most micro markets have not seen any drastic changes when compared to other cities like Bengaluru, Delhi NCR and Pune, these are higher by at least 10–15percent for comparable projects and locations.
Sandeep Reddy, Director, PropStack, India stated, “As more and more projects register for MahaRERA, the market, including end-users, will have better access to information on developers and projects. For end-users, having all information upfront will help them to assess the final product upon receipt….The data will help us create better, sharper analysis of demand as well as design future supply to help avoid demand-supply mismatches”.
While registering under MahaRERA, most builders have revised their delivery timelines. As per the report while 42percent of the projects are expected to be delivered on time, over 43percent of the projects showing delays of up to 3 years and the rest beyond 3 years.
Approximately 57 percent of the under-construction projects are delayed. 1454 projects will see completion in the year 2018, the largest volume of completion.
Also Read: RERA To Ensure Completion Of Realty Projects
CREDAI New India Summit
CREDAI is the apex body that represents over 12,000 private Real Estate developers spread across 23 state-level chapters and 177 cities in India. Established in 1999, CREDAI has worked hard to make the industry more organized and progressive by networking closely with Government representatives, policymakers, investors, finance companies, consumers and real estate professionals.
The New India Summit is another such effort from CREDAI to direct focus on Tier II, III and IV cities and develop them to be the forerunners of success. CREDAI New India Summit is all set to unleash the potential of an emerging India. This one small step has the power to give way to a new India.
For the longest time, our leaders and foresighted influencers have put all their time and energy in developing the Tier I cities namely Bengaluru, Mumbai, Delhi, Pune, Ahmedabad, Hyderabad, Chennai and Kolkata. No doubt, these cities have really changed the way people look at India today. These cities are the epitome of advanced technology and modern culture. But they also face challenges due to the grave pressure of urbanization. Decreasing quality of life, increasing the cost of living, overpopulation and unemployment, increase in transit time and traffic congestion, expensive housing, hospitality, education and healthcare facilities are some of the issues that all the Tier I cities face today.
According to a report, smaller cities are developing 79% faster as compared to metros with just 21%. Our of the 12,000 CREDAI members, 76.77% of them are from Tier II, III and IV cities. Looking at the scenario, it is only innate to divert the energies in developing the areas which still have potential. Thus, offering a good quality life to people in those cities itself and taking the pressure off of the Tier I cities.
The Forbes Magazine has said small cities are India’s emerging business locations. The government has also been putting dedicated efforts into schemes that directly benefit the growth of Tier II, III and IV cities. Sustainable economic development, improving infrastructure and transportation, increasing employment opportunities, and introducing technologies for rapid urbanization are some of the prime agendas that the government has been taking actions on.
The CREDAI New India Summit will take place on the 9th and 10th November 2017 in Nagpur, Maharashtra.
Piramal Realty Sign A Deal With Omkar Realtors For A 12 Acre Project In Mahalaxmi, Mumbai
Realty Firms Stick To Luxury Projects Backed By NRI Demand
10 Best Real Estate Brands that took over Social Media by storm in 2017
Property Brokers Gets Alert As Maha-Rera Indicate Towards A Mandatory Registration
Soilbuild Group Holdings Ltd. Streamlines Operations with Yardi Voyager
Mumbai’s Development Plan 2034: Second Draft Sees A Steep Drop In Responses
Bitcoin Finds Its Market In The Commercial Real Estate
Reforming The Realty Market: RERA Redefines Carpet Area
Housing And Urban Affair Ministry Takes Over RERA Administration
Project Review: Shivalik Ventures Gulmohar Avenue-Bandra North
Realty Nxt Interviews Mayfair Housing, MD Mr. Nayan Shah And Aditya Shah at CREDAI MCHI
Top 10 Real Estate brands to garner the maximum website traffic in India
Innovative Revolution of Real Estate Industry with MIVAN
Real Estate Blogs? Tips to get started
11 Pointers To A Perfect Real Estate Website
Technology1 year ago
Using Big Data to Find Clients for Your Real Estate Business
Ahmedabad Real Estate News3 months ago
Tata Value Homes Launches “Offer Of The Century” With 99 Hours Flash Sale on Affordable Homes
Bangalore Real Estate News5 months ago
5 Real Estate Tech Startups in India You Can’t Ignore
Mumbai Real Estate News3 months ago
Tanvi Group Fail To Deliver Homes And Declare Bankruptcy
India Real Estate News5 months ago
Tenders For ₹15,000 Crore Mumbai Coastal Road Project In Final Stages, Construction To Commence By Early 2018
India Real Estate News1 year ago
Maharashtra’s Real Estate Regulatory Act draft rules favour developers, say activists
India Real Estate News2 months ago
How Is Technology Shaping The Future Of India’s Real Estate Consultancy?
GST Real Estate3 months ago
Maharashtra Not Happy About Bringing Real Estate Under GST