Bridging the Gap between Sustainable Development & the pace of activity in Real Estate

As the nation embarks on its ambitious drive to boost infrastructure development and create 100 Smart Cities, there are concerns amongst environmentally-conscious citizens about the deleterious environmental impact. Globally, development and environment protection are perceived as antithetical goals. This need not be the case, if developers work on creating sustainable community living that promotes a healthy, active lifestyle.

In advancing the twin goals of national development and environmental protection, all companies should adopt the mantra of the three Rs: Reduce, Reuse and Recycle. Accordingly, the focus should be on sustainable development through the use of environment-friendly construction materials, energy conservation & renewable energy sources.

Although there’s no gainsaying that the realty industry uses trillions of kilos of wood annually, every developer should make it their corporate goal to plant 10 robust saplings for each tree cut down. While all the saplings won’t survive into adulthood, if well cared for, the final count will still be higher than that cut down.

Today, buildings account for almost 50% of the world’s energy, 1/6th of fresh water and 1/3rd of greenhouse emissions. Even if half of this consumption could be saved by efficient building designs and use of green technologies, the resultant impact on both the operating costs of businesses as well as the impact on environment will be enormous.

GREEN buildings have insulated roofs with reflective surfaces or even a roof garden. Outer walls are painted in light colours, ensuring lower heat absorption. Non-toxic paints, fly-ash bricks and bamboo are used to boost the green quotient. A green complex will also recycle water, switch off electrical appliances when not in use, recycle waste, save, and in some instances even generate energy, resulting in further bottom line savings. For an overall sustainable impact, the sewage treatment plants should be mandatory to treat waste water for use within a project. Rainwater harvesting pits should be built in all realty projects to capture the runoff from roofs and other areas. This can be filtered and made fit for use within the project, besides helping recharge the groundwater of the area.

A certified green office complex can assure a 25-50% saving on energy consumption costs and up to 40% reduction in water usage through innovative architecture and eco-friendly technology. It also produces 70% less solid waste and emits 35% less greenhouse gases. To achieve the best standards of Green construction, a net-zero energy home works on the principle of utilizing max renewable energy, independent of any electricity grid, by conserving the energy it consumes. Designed to be resource-efficient, GREEN structures use energy, water and other natural resources optimally, reducing the overall impact on environment – thus sustaining a healthier tomorrow. Operation costs go down dramatically with less electricity consumption over a sustained period of time.

Recycling and limited use of water and other resources results in great value for money. It ultimately leads to a higher absorption rate as well as attracts higher rentals due to the payback mechanism in the long run. As a result, buyers and tenants are getting increasingly aware and inclined towards sustainable real estate.

To boost the anticipated demand for “Green” projects, a comprehensive training framework needs to be put in place with a target of producing green certified structures. Given that the ‘’Green’’ market in India is at a relatively nascent stage, many challenges still need to be overcome to ensure its success. Besides a lack of skilled professionals which could impede the ability of the market to meet the demand for green buildings, there is also the challenge of ensuring the flow of adequate investments into green building projects.

Nevertheless, the Green building movement is gaining momentum, and there is absolutely no doubt that with rising awareness, aided knowledge and friendly policies from the authorities, the fast pace of infrastructure and development will be optimally balanced by the adherence to environmentally sustainable practices, in the time to come.

Villa Developments see a surge in Gurgaon

An important factor that fuelled the ambition to live an extravagant life was the exposure to international trends and lifestyles through the media explosion from the mid-80s onwards. It triggered higher aspirations among vast sections of the Indian populace, including the nouveau riche. Watching the uber-rich in foreign destinations, India’s elite aspired to lead luxurious lifestyles themselves. The aspirations inevitably spawned the rise of luxury homes, including villas, across the country with strong footprint in cities such as Mumbai, Bengaluru, Chennai, Delhi and Gurgaon, among others.

Over the past decade, however, Gurgaon has stolen a march over other metros in developing luxury homes. Today, villas are the epitome of desire with developers in Gurgaon at the forefront of premium developments, replete with world-class features and facilities.

Gurgaon’s demand is fueled by the fact that the Millennium City hosts most Fortune 500 companies and Indian blue chips. Their head honchos naturally wish to live in the best places money can buy. Presently, the prime destinations for luxury developments are Golf Course Road and Golf Course Extension. Fast-rising locales such as Sohna Road and New Gurgaon also offer luxury habitats.

Although the real estate market has been impacted by the general economic slowdown after 2008, the luxury segment seems impervious to these uncertainties. In fact, the luxury housing segment has seen steady price appreciation recently. This is because the target group for luxury villas are HNIs (high net-worth individuals), NRIs, expats and other sections of the super-rich. Being financially secure, such individuals do not depend upon loans, but on the power of their net worth. Rather than being a deterrent, high prices are a means for them to flaunt their edge and add to the overall exclusivity of the address. Price tags of such villas are in the multi-crore rupee domain.

As India’s GDP growth improves, the rise in the luxury segment is slowly surpassing that of 2008, with Gurgaon reportedly registering 20-25 per cent growth. A KPMG report states luxury has been the fastest-growing segment in residential housing. Not surprisingly, around 182 luxury projects worth $30 billion were launched in seven top cities between 2008 and 2012.

For luxury offerings, the key factors buyers note are the developer’s brand and credibility, the location, recreational facilities as well as the quality of fittings and furnishings, among other things. Many projects are villas-only gated communities replete with 24×7 security systems. Most villas typically have four or five bedrooms, a lounge zone, terrace gardens, plunge pools and private elevators in case of multiple stores. Select developers even offer internal accessories and devices with smart technologies based upon trends and latest innovation. World-class designs and lush landscaping are also a part of the course, in some cases via tie-ups with international architects.

Developers of luxury villas are confident that the premium market will go from strength to strength. An Ernst & Young and Kotak Wealth Management report reveals ultra-high net-worth individuals are expected to triple to 343,000 by 2018-19 from 117,000 in 2013-14. There is no reason to doubt that the luxury villa segment is bound to burgeon because increasing number of Indians display an irresistible desire to own their own piece of land with their individual patch of green which is embellished and accessorized with the best features, fittings and facilities – a demand India’s luxury developers are eager to fulfill.

Customer Relationship Management (CRM) – Rising Importance in Real Estate

In view of the rapid advancements in the real estate domain, with regard to increasing numbers of developers, customers, projects, locations, trends & practices, the secret to building long term equity for a brand rests in creating a competitive advantage through value-added and differentiated service of the customer. Strategic tools such as customer relationship management (CRM) play an important role in fulfillment of such an objective.

With the entry of renowned names in realty sector and increasing FDI, the competition is becoming stiff. The rising spending power of the working population, demand for premium & luxury housing, heavy NRI investments in Indian realty market, and the rising importance of the ‘Service’ aspect is making the real estate developers go for high standards of professionalism.

Relationship management is a customer-oriented feature with service response based on customer input, one-to-one solutions to customers’ requirements, direct online communications with customer and customer service centers. This function can also deliver sales effectiveness such as sales promotion analysis, automate tracking of a client’s account history for repeat sales, and also сo-ordinate sales-marketing-call centers-retail outlets in order to realize the salesforce automation. It can also track and measure marketing campaigns over multiple networks. These systems can track customer analysis by customer clicks and sales.

Across functions, it uses technology to make “up-to-the-second” customer data available. It applies data warehouse technology in order to aggregate transaction information, to merge the information with CRM products, and to provide KPI (key performance indicators).

In the world of real estate, every project is unique in terms of location, project features, pricing, post sales services and other offerings. With every developer managing a number of projects, the main challenge is to identify the target segment through data from primary and secondary sources, manage lead generation campaigns for different projects effectively, analyze the leads scientifically, find cross-selling (offering customers complimentary products based on their previous purchases) and up-selling (offering customers, premium products in the same category) opportunities and sustained follow-up efforts that convert the footfalls into business. Also based on analysis of past sales success and various metrics related to it, it becomes easier to define strategies for the future. The facility to create a variety of reports and dashboards with critical sales data becomes the basis for effective decision making.

It thus helps in improving segmentation scalability for targeting millions of prospects. This also helps in enhancing marketing productivity, increasing conversion rates and reduces campaign execution costs.

From a buyer viewpoint, property related decisions whether buying or leasing are capital-intensive and involve a number of interactions with the developers before finalizing. Keeping a record of all these interactions and analyzing the outcome of each interaction and taking appropriate action to facilitate the lead-to-customer conversion is a vital element of CRM principles.

CRM enables a holistic, disciplined approach to planning and budgeting. With world-class CRM it is possible to create a marketing calendar integrated with the financials, providing a centralized view to manage and schedule all relevant enterprise marketing plans and campaigns.

In a typical real estate sales lifecycle, the real estate company has to communicate with the customer on numerous occasions such as milestone completion, demand letters for payment, maintenance related communications etc. Any errors/redundancy here can cause a serious damage to customer relationships. With CRM systems, it is possible to configure and trigger automated communications through email/mobile messages, based on transactions taking place in the customer/prospect account. An example would be to send out birthday greetings, wishing on special memorable occasions and so on. For an existing customer, this could also mean sending out updates on new properties coming up, sending out referral scheme details etc.

CRM is imperative in today’s business and consumer context, especially in the real estate industry. For companies which adopt it on a holistic scale, it spells the strong possibility of building strong and enduring customer relationships, thereby reflecting shine on brand value metrics.

Green Buildings & India’s potential for Green Structure

Today, buildings account for almost 50% of the world’s energy, one-sixth of fresh water and one-third of greenhouse emissions. The energy drain is due to the dependence on conventional energy sources for power, coupled with lack of efficient energy utilization.

There is however a positive change being witnessed across societies. Green Building, which makes use of such design and construction features that offer intelligent choices in the use of water, power and recycled material, is the new paradigm in real estate. In the Indian context, as the number of environmentally-committed consumers and companies is growing fast, the real estate sector is also witnessing a sweeping change. What is pushing this trend further is the increasing awareness and concern about the impact of buildings on human health, environment and the economy. Even if half of the existing consumption is saved by efficient building architecture-design and use of green technologies, the resultant benefit on both the operating costs of businesses and the environment will be enormous.

A certified green office complex can assure a 25-50% saving on energy consumption costs, up to 40% reduction in water usage, produces 70% less solid waste and emits 35% less greenhouse gases. A green complex will also recycle water, switch off all electrical appliances when not in use, recycle waste, save and also generate energy, resulting in further bottom line savings. Studies around the world show a pattern of green buildings being able to more easily attract tenants and to command higher rents and sale prices. As green homes are evaluated for a 10-20% premium on rental costs than conventionally built homes, they are also able to hold their price over the long run. A study conducted on life cycle costing on GRIHA rated green buildings in India concluded that “Green buildings are a boon to investors, yielding high returns as compared to investments in conventional buildings or other investments, in a shorter duration’’. The results suggest that an otherwise identical commercial building with an Energy-Star certification will rent for about 3% more per sq. ft.; the difference in effective rent is estimated to be about 6%. The increment to the selling price may be as much as 16%.

The “greening” initiatives of India’s building and construction industry received a boost recently when the country was ranked #3 among a list of the top 10 countries in the world by the US Green Building Council (USGBC) for LEED outside of the US. From a modest beginning of 20,000 sq. ft. in 2001, the country now boasts of 1 billion sq. ft. of green building area. India’s total built-up space of 25 billion sq. ft. is expected to increase to 80 billion sq. ft. by 2030. The share of green buildings in this construction boom could be as high as 20%. The Govt.’s ambitious plan of developing 100 smart cities will also provide the much-needed impetus to scale up the green index.

At the same time, demand for high quality, energy efficient, commercial office and retail spaces by multinationals, IT-ITES sector, health care and services industry, will spur the growth of green projects across India. Improving energy efficiency standards like the Energy Conservation Building Code, stricter government regulations and environmental policies will also create the necessary momentum and ground for the green building movement to prosper. Other incentives such as providing additional floor space, granting transferable development rights, fast tracking approvals and interest subvention can go a long way to promote green buildings.

To meet the anticipated demand for ‘’Green’’ projects, a comprehensive training framework needs to be put in place to nurture a core group of green building professionals with the well laid down target of producing green certified structures. There is also the challenge of ensuring the flow of adequate investments into green building practices and projects. A push on the policy front with tax incentives could bolster the trend, as it has in countries like the UK, the US, Japan, France, South Korea and China. For instance, framing policies that lower the tax component on all aspects of green building construction (design, material, solar or wind and other renewable energy sources plants, rain-water harvesting plants etc.) will surely give an impetus to development of more green projects and green investments in the real estate industry.

The luxury Housing Segment – A wealth of opportunity for both developers & buyers

Rise above the necessary and then above the premium. When you have done that, you are in the lap of luxury. The luxury connotation varies at an individual level; and its perceived value varies with one’s specific needs and aspirations. Luxury living involves creating an overall experience that not just meets the expectations of customers but attempts to exceed it. In India, luxury housing has picked up the most in the luxury segment. Modern homes today pack features that meet the growing aspirations of people who want their houses to reflecttheir social and financial standing. Depending upon the city and suburb, these come as apartments, penthouses, suburban villas and bungalows, and are often close to a golf course or a green expanse. Industry experts attribute the rise in luxury housing projects to the over-supply in the premium segment during the 2008 economic slowdown.

Luxury and ultra-luxury residential projects in leading cities have witnessed ten-fold appreciation over their launch prices, over the last decade. Cities such as Mumbai, Pune, Bangalore, Delhi, Gurgaon, NOIDA and Chennai, have been topping the charts in the luxury housing segment. This implies that there have been more than 100 per cent annual returns on investment. In fact, there has been a tremendous response to these projects; so much so that most of the projects are declared sold-out in a very short span of time. The response in cities like Gurgaon, where demand has outpaced supply, has encouraged developers to shift their focus to this segment due to high profit margins and good volumes that help in securing significant fund flows, to capitalise on the completion of their projects. Tier-II cities such as Ahmedabad and Lucknow have also shown encouraging market developments under this segment. The areas adjacent to the NCR such as Noida offer locational advantage coupled with world class infrastructure.

From a customer and category viewpoint, luxury housing is projected to register maximum growth, owing to the increasing HNI (high networth individuals) population and growing aspirations of people, changing lifestyles and the affluent young with high disposable incomes looking for a luxury lifestyle. As per industry reports the sector is expected to give India a 13.9% of CAGR by 2028 and the HNI segment is expected to grow at 27% by 2017-18. Also luxury properties in India are highly discounted when compared to those in other parts of the world. Additionally, large number of NRIs who have completed their high paying tenures abroad are coming back to India every year and accelerating the growth of the luxury real estate market. The expected returns from investment in premium properties are higher in comparison to investments in bullion and stock markets. The luxury housing segment is also not prone to the ripple effect of recession as the target audience is not dependent on home loans but operates on the basis on net worth.

Most of the luxury housing projects typically entail a prime location with great access and a spectacular view. Additionally, top quality architecture & interior design, modern amenities, premium construction material, landscape design, concierge services and high-end security arrangements are vital elements of the package. Despite the high input costs, the developer enjoys visibility of his brand among highly affluent and top-end clients. The evolving mindset of the buyers is also changing the dynamics of ‘luxury homes’. While there is still a focus on spacious living, an increased emphasis on ‘smart home’ accouterments, high-end common amenities and technologically evolved security. These were certainly not the factors that went into the definition of luxury living a couple of decades back.

The luxury housing segment is undoubtedly a great promise for the buyers and sellers alike, and with the real estate sector witnessing some important and industry-friendly policy-making due to the new Govt.’s positive intent, the goods of the luxury housing segment are in the process of being realized and experienced.

How Indian Real Estate industry is gaining from integration of property & Financial Markets

India’s real estate industry is going through a metamorphosis – it is transforming into a more transparent, competitive and accessible real estate market. The past few months have witnessed clarity in the regulatory environment, FDI and growth of private equity and demand for high quality real estate.

Over the years, the industry has seen a marked emergence of more institutional investors, leading to substantial infusion of capital, including PE and FDI in real estate. For instance, during the past 10 years, an estimated USD 15 billion was invested in the real estate sector by way of PE capital alone. Though it still has to come up to the levels of markets in Australia, Singapore, UK and America, Indian real estate industry is fast adopting global standards and processes. Today, many cities apart from Delhi & Mumbai such as Hyderabad, Pune and Chennai are leading in terms of availability of market intelligence and quality of real estate development.

With the government showing serious intent and purpose in pursuing reforms, easier availability and accessibility of reliable information in areas such as financial reporting, property taxation, planning regulations is required. A stronger focus should also be directed on the provisions that govern the application of tax and building codes, licensing, permissions, land purchase, development activities, leasing, and land titles. Enforceability of contract and land registry information should be made more consistent across cities. Transacting in property and putting it up for lease, sublease, mortgage and other purposes should be made simpler and more efficient.

The impending notification of the Real Estate Regulatory Bill and proposed modifications to the new land acquisition law are expected to help resolve many of these issues. The recent relaxation of FDI norms is particularly welcome as it will certainly help the industry become better organized and transparent. Similarly, the launch of REITs will enable the industry to tap into structured, institutional sources of funding. Being publicly traded investible units, they will nudge real estate companies to move away from private to public financing, bolster the concept of public ownership, and provide the framework for real estate companies to become more transparent and better managed.

As we move closer to another new year, many of the above-mentioned steps and anticipated measures will push India’s real estate industry to flourish. But more than the new rules and regulations, it will be their implementation and execution that will hold the key to ensuring that the industry benefits from these reforms. If the standing and new measures are implemented purposefully and if compliance to the rules is made more stringent, the real estate sector in India is destined to grow from strength to strength.