COVID 19 has, on the one hand, ravaged the consumer sentiments to a large extent, it has on the other hand opened different paths for most of the industries to stay buoyed. Nothing is different with the Real Estate industry as well. Most of the developers are following the new paths to lure customers and ensure the movement of their inventory. Goes without saying that this new path is completely driven by Digitalization and technology.
Although the Real Estate industry is experiencing a spurt in the inquiries post-COVID, thanks to the pent up demand which is resurging, how long this pent up demand will sustain is a big question mark in front of most of the developers. Nevertheless, all the possible efforts are being put in to make the best of these inquiries and translate them into sales.
It looks like the residential segment has already caught the momentum with most of these inquiries are getting translated into quick conversions. This is because most of the customers who were sitting on the fence are now taking the final call. Also, there has been a surge in the new customer buying mainly due to the value deals which the developers are offering and also because of the dirt-cheap home loan rates. On the other hand, the commercial real estate segment which had been the growth engine has suddenly lost the momentum amidst the COVID crisis and looks like it may take a good deal of time before this segment gets back its luster.
In the context of the above circumstances, it becomes imperative for us to understand as to how these developers are managing the show under the looming fear and anxiety of COVID. Let us have an insight into what’s happening on the ground.
Webinars have proved to be a very effective medium to reach the prospects and have also worked out to be a cheaper and convenient option. Developers are organizing regular webinars for their customers to share the project details and also to communicate the new schemes and offers. Developers are finding active participation in these webinars since a large part of their customers are working from home currently. They try to keep these webinars as interactive as possible to address all the possible queries which customers have.
Virtual Site Visits
Virtual site visits are acting as a replacement for physical site visits. This has proved to be another convenient way both for the customer and the developer to have a clear insight into the project. The salesperson takes the customer on a Virtual Tour of the project through a video call. Starting from the model apartment to the actual flat along with the common areas and the amenities and the specifications, the salesperson covers every aspect of the project in the video call. The objective is to orient the customer on all the features of the project since a physical site visit may not be possible at this point. This is followed by the explanation and briefing of pricing and other schemes.
Since people are obsessed with contactless activities amid this COVID crisis, Developers are also embracing the thoughts and are deploying contactless kiosks and gadgets across their site offices to service their customers. Albeit these interactive gadgets at the site offices were installed and were in use much before Covid19 by a few leading developers, their importance is now realized and many developers are now following these footsteps and have started installing these devices across their site offices. Any customer can just walk into the project site and with these easy-to-use interactive devices can know every aspect of the project including the availability and pricing for the preferred unit with literally no or very little assistance from the salesperson.
Also, the developers have now started as a practice of scheduling the site visits by giving appointments to the customers, especially during the weekends, so that no two customers walk into the site office at the same time. This process is currently manageable since the velocity of the visits is less.
Payment Holiday has proved to be a very effective tool in ensuring conversions offered by the developers. Under this scheme, a customer is not required to make any payments for a stipulated period. The period may vary for 1- 2 years depending on the stage of the project. The customer can book his apartment but he is relieved from making any payments at least for the time where there is uncertainty all around. This scheme acts as an insulator amid the stagnant or dwindling incomes of the customer.
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Price Guarantee schemes are in vogue currently. Since a lot of customers are anticipating the real estate prices to fall sharply in the context of the COVID crisis, for those sitting on the fence it becomes very difficult to make a final decision. Hence to clear this fog, the developers are offering price guarantees thereby guaranteeing the customers that they will not sell below the offered price anytime in the future and if they do so, they will indemnify the customer to the extent of the reduced price.
Cheaper Home Loans
The home loan interest rates have been on a free fall for a while now and are currently at their best. Few lending institutions are offering interest rates sub 7 % which by and large are the best rates in decades. A large chunk of home sales is financed by home loans, and thus Home loan becomes the fulcrum of any home-buying decision. Since the rates currently are dirt cheap, this becomes an apt time for any home buyer to finalize on his property.
Extension of PMAY Scheme
The extension of the PMAY scheme by the housing cabinet has been a shot in the arm for home buyers and developers. The scheme which was earlier due to expire in March 2020 has now been extended till March 2021. This means more home buyers can avail of this scheme. The scheme has received a very good response since its launch and banks have been touting this scheme to push their home loan products and penetrate deep into the end-use home buyers.
Albeit the above measures can keep the developers buoyed till the demand picks up, one should also not forget that the demands of the customers have changed post the COVID era and therefore the developers need to be proactive in case if they have to be in sink. This has led to the developer fraternity to quickly adapt to the changes and mull on the following streams.
This is a blend of the present construction technology with Digital Technology. In simple words, all the critical components will be controlled by the internet and very little human interference may be required. Contactless Entry and Exits, Contactless lifts, Interactive kiosks at the clubhouse, all homes are home automated by default, are the few examples of digital engineering. All this may come at an additional cost but the benefits will overpower the costs in the long term. Also since the technology is available and is already in use in the developed countries, imbibing the same may not be an onerous task for, most developers.
Energy Management and IGBC Certification
Energy Management is one of the emerging streams in the construction industry and shall be widely adopted by many developers. Energy management refers to the smart management of necessities like Water, Electricity, Sewage, and Garbage. The primary objective of energy management is reducing costs and optimizing the output. This will in turn bring down the maintenance cost for the residents. Sustainable water and power conservation, installation of Solar panels for common meeting the power demand, Using treated water for all common area maintenance, and recycling of garbage are the common practices for Energy management. The right adoption of these practices will qualify the project for IGBC certification.
IGBC certification is one of the most coveted certifications among a few leading developers in the country. Projects which are certified by IGBC follow high standards of energy management with sustainable policies and practices in place. The maintenance costs in such projects are very less and get minimized in long term. More and more customers are getting aware of the benefits of such projects and are willing to buy them. The initial outlay at the beginning may be a bit high when compared to the normal projects, however, when one looks at it in the long-term perspective the benefits outweigh the cost in actual terms while the capital appreciation will also be high.
Is Price Correction in the Anvil
The most anticipated and expected move by a chunk of home buyers is a Price Correction. It has been observed that whenever there is a negative disruption in the economy, the first brunt is faced by the residential real estate segment mainly due to the deferring of capital expenses by the customers and the second main reason is home buyers start expecting a significant price correction to happen in residential projects. Theoretically, this phenomenon happens to be true however when one looks at it in a practical angle, the price correction becomes a far sight mainly due to the high costs which are being incurred by the developers. Among the costs, Material, labor, and cost of the borrowed money form the crux of the overall costs incurred. These costs either remain stagnant or keep increasing irrespective of the disruption in the economy. Moreover, the competition in the realty segment over the years has prompted developers to work on thin margins having left very little legroom for reducing the prices. Similar is the situation amidst the COVID pandemic, where homebuyers are anticipating the prices to fall, while the developers are grappling with high labor costs due to the migrant crisis and high cost of servicing the borrowed money from the lenders. Any reduction in the price below a point will only add to the developer’s woes. In such a context, the developers are generally willing to hold the stock then selling it at a discounted price since it will only amplify their pain.
Price correction in Real Estate, especially in a disturbed economy has always been a perpetual expectation from the home buyers and certainly, the developers have been adhering to their expectations in the possible manner and extent. But are the discounts offered good enough in the context of the current demand-supply situation, is an area of ambiguity for most of the home buyers. However when one has to scratch below the surface to know the components of the cost, given that there is still a large amount of red-tapism involved when it comes to getting the required permissions, clearances, and NOCs from the respective departments for starting any real estate project.
The developers have been craving single-window clearances for real estate projects for a long. This will not only remove the red-tapism from the industry but will also result in significant savings of costs which in turn can be passed on to the final customers. The government has also been mulling on it for a long and sooner then later the industry is expecting this to be in place.
Hence the sum and substance are that it is fair for the home buyers to expect a price correction, however, given the cost factors involved and the current state of affairs of the real estate industry, how much will be the magnitude of this correction is something to ponder upon.