India’s Potential for Green Buildings

Globally, buildings are responsible for 1/3rd of greenhouse gas emissions. This is mainly on account of 2 reasons:

  • Buildings rely on conventional energy sources for power
  • Most buildings do not use energy efficiently

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 Indian real estate. 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 about the impact that buildings have on human health, environment and the economy.

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.

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. A green complex will also recycle water, switch off all electrical appliances when not in use, recycle waste, save, and in some instances even generate energy, resulting in further bottom line savings.

A certified green office complex not only has a positive environmental impact, it results in many direct financial benefits to the owners as well the tenants. On an average, certified green buildings (such as LEED):

• Consume 25-50% less energy

• Use 40% less water

• Produce 70% less solid waste

• Emit 35% less greenhouse gases

Thereby not only delivering a positive environmental impact, but direct financial benefits to the owners and tenants.

Taking into account the multiple benefits that green buildings offer, the green building trend in India is gaining both speed and strength.  According to one estimate, over the next three to four years, about 200 million sq. ft. of commercial space and 45 million sq. ft. of retail space is expected to be constructed across major cities in India, which indicates that there is a great opportunity for developers and consumers to promote and embrace the concept of green buildings.

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. This is because material used in green home projects is more durable than conventional ones. As green homes are evaluated for 10-20% higher values 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 boon to investors, yielding high returns yielding high as compared to investments in conventional buildings or other investments, in a shorter duration’’. Another study on commercial building which have obtained Energy Star Label and or LEED rating clearly indicated its importance in affecting market rents and values of commercial space. The results suggest that an otherwise identical commercial building with an Energy-Star certification will rent for about three percent more per square foot; the difference in effective rent is estimated to be about six percent. The increment to the selling price may be as much as 16 percent.

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 square feet in 2001, the country now boasts of 1 billion square feet of green building area.

Evidently, the green building movement in the country is getting well entrenched and looks set to change the course of the construction industry.

IGBC estimates that the Indian green building industry will be a $100-billion opportunity by 2015. India’s total built-up space of 25 billion square feet is expected to increase to 80 billion square feet by 2030. The share of green buildings in this construction boom could be as high as 20%. The government’s ambitious plan of developing 100 smart cities will also provide the much-needed impetus to the green building movement. Besides using information and communications technologies (ICTs), most smart cities will have to adhere to green building norms and reduce carbon emissions. This would make them both ‘smart’ and environment friendly.

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 flourish and bloom.

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. Given that the ‘’Green’’ market in India is at a relatively nascent stage, many challenges need to be overcome to secure the success of the movement. 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 practices and projects. In an unstable real estate market scenario, the difficulty in sourcing green building materials and convincing developers to invest in green projects becomes all the more challenging.

A little push on the policy front and some tax incentives could help the green building trend in India’s real estate development to come into its own, as it has in countries like the UK, the US, Japan, France, South Korea, and China among others. Exploring various policy interventions at different levels can turn green building a grassroots agenda in India too. 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. Other incentives such as providing additional floor space, granting transferable development rights and interest subvention can go a long way to promote green buildings.

Reforms to unleash Real Estate industry’s potential

At a conference in New Delhi recently, Union Urban Development and Housing Minister M. Venkaiah Naidu said the Government is holding discussions with various ministries on the need for single window clearance and also about giving infrastructure status to the real estate and housing sector. The minister also said the Government will introduce the Real Estate (Development and Regulation) Bill in the coming winter session of Parliament.

Judging by the spate of new policy measures and announcements over the past few months made by the new government at the centre, the minister’s pronouncements raise hope that the government means business and is serious about carrying out reforms in the real estate sector. In fact, some of the issues referred to by the minister have been raised by the industry time and again, and are long overdue.

Take, for instance, issues related to the granting of infrastructure status to the real estate sector, provision of putting in place single window clearance system and the passage of the real estate regulatory bill. The industry has flagged these issues for several years now and has been vociferous in asking the government to take initiatives on these policy fronts.

After all the toing and froing and years of foot-dragging on the matter, it seems that at last the industry may be close to gaining a policy breakthrough. Some of the recent measures and announcements of the government certainly portend good news and better times for the real estate industry. At least, the actions convey a new sense of purpose and resolve on the part of the government to move ahead in carrying out the much-awaited reforms in the real estate sector, which contributes about 6.5% to the national GDP and is a lifeline to several ancillary industries.

Within days of assuming power, the government made a bold vision statement of providing “housing for all” by 2022. Other fairly substantive moves include the programme for establishing 100 smart cities, the recent notification of norms for launching REITs, efforts to bring in more flexible modifications to the new Land Acquisition and Rehabilitation and Resettlement Bill and the easing of norms currently underway for facilitating higher FDI in construction development sector.

The industry is waiting to welcome the roll out of more friendly policies and reforms so as to attract a lot of greenfield investments and new projects. Going ahead, we hope government action on several other fronts such as simplification of approval processes for real estate projects, higher FAR to ease cost pressure for developers and end users, push to sustainable construction, easier norms for real estate funding and the passage of real estate regulatory bill. Some regulatory push may also be in order for incentivising developers who are adapting practices for sustainable developments and affordable housing.

According infrastructure status to the industry will benefit the sector immensely. Taking this step alone would go a long way in resolving the issue of funding for real estate projects, reduce the timeline for project completion and thereby help to cut the overall cost of construction. Infra status for housing would help make projects more price-competitive for the end users and give developers the incentive to push for more sustainable construction and take up affordable housing in a big way.

Similarly, the implementation of the real estate regulatory bill will pave the way for a more attractive and transparent real estate market. The main purpose of the Bill is to safeguard the interest of customers and help developers do business as per stipulated norms. It will also improve market sentiments further and help to reinforce customer faith in the sector.

For example, the provision to launch or market a project only after receiving all necessary approvals will benefit customers and pre-empt projects that don’t have all the approvals in place. Misleading project advertisements will also become passé or risk attracting a penalty equivalent to 10% of the total project cost. Repeat offences could land defaulters in jail, with a full refund of the principal amount along with interest to buyers becoming due. Housing units will also need to be sold as per ‘carpet area’ (which denotes the wall-to-wall area inside a house) instead of the presently popular ‘super built-up area’. Additionally, with developers having to register all projects with the regulatory authority before commencing construction, customers would be able to track the status of every project.

On the whole, the passage of the Bill would be a welcome development for the industry, although the outcome would be even better if it also includes a mechanism for single-window clearance. With over 33 clearances required for a project from different authorities, unwanted delays abound for no fault of developers. Securing such approvals usually takes a minimum of eight months and can even stretch to a few years. Prolonged timelines trigger cost escalations beyond the control of developers, which get eventually passed on to customers.

Another point of concern, from the developer point of view, is the clause stipulating the creation of an escrow account on the part of a developer for each of his project. As per the clause, developers need to park 70% of buyers’ payments to facilitate timely completion. Thereafter, 10% extra could be added to the construction cost and that amount escrowed. Though the intention is commendable, the outcome will be unfair to developers, who would be victimized for delays in approvals over which they have no control.

As a real estate player, we therefor believe that a real estate regulatory bill, which provides for single window clearance as well, would bring about a paradigm change in the functioning of the real estate industry and be a win-win proposition for both developers and customers. While the concept of escrow accounts is sound, the target amount should only be formulated after consulting developers. Blocking the cash flow of developers is not good for the industry or customers because it will impact delivery schedules.

Moreover, construction costs vary across regions. In some cases, 30% may be required for construction, whereas in others it could be more or less. Given that approvals, debt and holding costs are high in realty, blocking 70% in escrow accounts will severely hamstring developers.

Overall, the government’s intention to eliminate ambiguities and introduce transparency through the Bill is creditable. Its implementation will reassure customers and also inspire developers to follow corporate governance guidelines as well as global best practices. As far as some of the reservations that remain about the Bill, the industry is hopeful that the government will, in consultation with all stakeholders, bring about the necessary amendments to ally the apprehensions of the industry. Ultimately, what’s required is a real estate bill addressing the concerns of all stakeholders, not just one section.

Leveraging REITs for Affordable Housing

Most of India’s housing deficit is in the affordable residential segment. Affordable housing in India ranges from 250-650 square feet (one or two bedroom set) and typically costs between USD 8,000-17,000 per unit. Considering an average housing size of 400 square feet, India requires about 15-18 billion square feet of development in this segment alone. As per the report of the Technical Group on Urban Housing Shortage (2012-17), Urban India is in need of 18.78 million dwelling units out of which nearly 96% belongs to the Economically Weaker Sections (EWS) and Lower Income Group (LIG) Households. These two income groups are expected to account for 85-90 per cent of the total residential development (number of housing units) i.e. about 40-45 million housing units by 2028.

Scarcity of affordable housing in Urban India and the existence of a wide gap between the demand and supply of housing, both in terms of quantity and quality, have created a plethora of problems, including the proliferation of slums. As per the National Sample Survey Organization, one-eighth of India’s urban population currently lives in slums. The deteriorating condition of the urban poor in major Indian cities is a disconcerting theme in the country’s urban revolution. More than 300 million persons are expected to be added to India’s working age population by the year 2050. According to UN estimates, India has the highest rate of change of urban population among the BRIC nations. An estimated 843 million people will live in Indian cities by the year 2050, which is about the same as the combined population of the US, Brazil, Russia, Japan and Germany.

Needless to say, the need for providing housing/accommodation facilities in our cities will become even more acute in the years ahead. It has therefore become a matter of great concern and urgency that our policymaking and government thrust is geared towards solving the country’s housing needs, especially in the affordable segment. Taking cognizance of this grave situation, the draft Model State Affordable Housing Policy for Urban Areas issued by the Ministry of Housing and Urban Poverty Alleviation calls upon state governments to establish linkages and bring convergence with the various fiscal initiatives provided by the Government of India for Affordable Housing projects such as Foreign Direct Investment, External Commercial Borrowings, Urban Housing Fund Refinance Scheme, Real Estate Mutual Funds, Real Estate Investment Trusts, etc.

Over the past few months, the new BJP government at the centre has moved ahead and set the ball rolling on quite a few of the above stated fronts. The government has announced that it is committed to providing “housing for all” by 2022. It has acted swiftly to further liberalize FDI in the construction sector and has granted greater leverage to Indian companies in tapping commercial borrowing from overseas. The recent notification of REITs – a vehicle that has played an important role in financing real estate industry in the US, Australia, Singapore, Hong Kong, and several other countries – by the Securities and Exchange Board of India, is expected to bring the country closer to finding the right solutions in providing affordable housing to large swathes of the Indian population.

However, for the time being, the REIT norms notified by SEBI don’t talk about its possible role in the affordable housing space. The focus of REITs for now would be on commercial and retail property. Leveraging REITs in affordable housing would require the creation of residential or housing REITs, which is not on the horizon currently. But one can expect many changes to the REITs regime going ahead, including those that could help address the issue of affordable housing in the country.

In mature markets such as the US and UK, where REITs have been operating for many years now, governments have shown a keen interest in exploring how this model could be used to attract investment into the residential sector, particularly for social and affordable housing. According to a report by Mazars, an advisory firm in UK, REITs have a vital role in funding the social housing schemes. Policymakers in the UK have been focusing on this model to facilitate an increase in the supply of social and affordable housing across the country.

Typically, housing REITs acquire, renovate, lease and manage residential properties located in markets to generate rental income. As REITs cannot invest in under-construction property but only in those with regular income, they hold properties over the long term and generate virtually all revenue by leasing the properties. This revenue is used to pay for operating costs and distribute dividends among shareholders. For instance, a type of housing REIT known as apartment REITs own a portfolio of rental apartment properties, which may be large residential properties such as mid-rise and high-rise buildings, student housing, senior housing or social housing.

On the other hand, REITs provide the sponsor (usually a developer or a private equity fund) avenues of exit thus providing liquidity and enable them to invest in other projects. The vehicle’s potential for generating liquidity is being harnessed across the world to securitize rental-housing units owned by government bodies and to help finance affordable housing by attracting private sector investment.

The potential of REITs to securitize government-owned rental housing and raise fund to finance new constructions of new affordable rental housing is something that the government in India can well make good use of. Government bodies and agencies in India hold a lot of public housing property worth billions of rupees. But the lack of liquidity has made these agencies stuck with holding properties, and reduced their ability to build more public housing for low and medium income groups employed in the government sector.

In fact, the government can move beyond public housing for its employees to leverage REITs for creating a public-private partnership for the development, funding and management of affordable housing for the public. Countries like the US and Hong Kong have made significant progress in affordable housing by creating appropriate REIT structures. In the US, REITs has had a long history of involvement in affordable housing. As far back as in the 1950s, a REIT called The Mutual Real Estate Investment Trust (M-REIT), started by Morris Milgram, began to build communities, which were both economically and racially integrated. The objective of M-REIT was to invest in income-producing real estate in good neighborhoods and offer housing to all.

Milgram realized in 1946 that there was an unwritten law in the US that all new housing and almost all decent housing was for whites only. He then decided to build integrated housing for all. The first integrated community, Concord Park Homes, was built in 1954 and buildings there were sold to both the white and the black. This project and the followings were successful and able to pay 7% a year to investors. Other than development, M-REIT also managed economically integrated buildings. Its first project had more than 300 apartments, with rents that range from $26 to $41 a room.

Like the countries that have successfully leveraged the REIT model to promote affordable housing, India too can tailor the REIT’s regime to unlock its potential and attract investment in the housing sector. However, due to the lower returns from social and intermediate housing, the country will need to develop a suitable model that is attractive enough to encourage investors. Lessons from other countries suggest that REIT models can be used to develop a strong rental market in affordable housing.

As land cost in India is inordinately high, buying a property becomes an unviable affair for many. Creating a strong rental market in affordable housing is therefore essential for not just making accommodation available to low and mid income groups but also for attracting REITs in this space. Affordable housing that guarantees a stable and steady cash flow to REITs not only makes it a low risk business but would also help to attract the interest of institutional investors in the sector. As demand of affordable housing in the country is huge, the vacancy rate is bound to be very low. That is to say affordable housing has a relatively lower risk than other property types, making it a low risk investment tool for pension funds and insurance companies.

But to attract participation of the private sector in affordable housing REITs, government should subsidize the development and holding of affordable housing. Experience from the US tells us of the key role that the policies of government played in attracting REITs into affordable housing. The active participation of REITs happened during the period when Section 8 Program and LIHTC Program were largely used. While Section 8 Program helps the holding of affordable housing through rent subsidy, LIHTC Program helps the development of affordable housing through subsidy of tax waiving.

It is therefore not too much to ask the government to step in with incentives and appropriate policies that would make affordable housing attractive to REITs. As in the US, India can look at providing rental subsidies by way of tax credits and incentives so that REITs are able to tap into affordable housing for providing stable income with little risk of losing tenants. To help REITs enter and build the market for affordable housing, government should also design long-term policies that encourage building affordable housing by the private sector. This is especially important because REITs are only a way to help liquefy properties, but have limited power in attracting private sector participation without the advantages of policies. Therefore, government should keep in mind that REITs still need policy supports to play a real active role in affordable housing.

REITs: Reading between the Lines

Recently, after much deliberation and consultation, the formal notification outlining the basic rules for setting up real estate investment trusts was issued by the Securities and Exchange Board of India. All REIT schemes, to begin with, will be close-ended real estate investment schemes that will invest in property with the aim of providing returns to unit holders. The returns will be derived mainly from rental income or capital gains from real estate.

REITs will be allowed to invest in commercial real estate assets, either directly or through special purpose vehicles. In SPVs, a REIT must have a controlling interest of at least 50% of the share capital and will have to hold at least 80% of their assets directly in properties. REITs will be allowed to raise funds only through an initial offering and units of REITs have to be mandatorily listed on a stock exchange, similar to initial public offering and listing for equity shares.

A REIT will be required to have assets worth at least Rs.500 crore at the time of an initial offer and the minimum issue size has to be Rs.250 crore. The minimum subscription size for units of a REIT on offer will be Rs.2 lakh and at least 25% of the units have to be offered to the public. Subsequently, REITs can raise money through follow-on offers, rights issues or qualified institutional placements and the trading lot for such units will be Rs.1 lakh.

According to the norms, although a REIT may raise funds from any type of investors, resident or foreign, initially only wealthy individuals and institutions will be allowed to subscribe to REIT unit offers. The market regulator said a REIT may have up to three sponsors, with each holding at least 5% and collectively holding at least 25% for a period of at least three years from the date of listing. Subsequently, the sponsors’ combined holding has to be at least 15% throughout the life of the REIT.

To ensure that REITs generate continuous returns, Sebi has said at least 80% of the REIT’s assets have to be invested in completed and revenue generating properties. And only up to 20% of assets can be invested in properties that are being developed, mortgage-backed securities, debt of companies in the real estate sector, equity shares of listed companies that derive at least 75% of their income from real estate, government securities, or money market instruments. No REIT can invest more than 10% in properties that are under construction.

Further, every REIT has to invest at least in two projects, with a maximum of 60% of assets going towards one project. All REITs have to distribute at least 90% of their net distributable cash flows to the investors. To ensure transparency, Sebi has made it mandatory for every REIT to undergo yearly valuation and declare its net asset values within 15 days of the exercise.

The introduction of REITs will make India’s real estate market more institutionalized and transparent while also making it more attractive for developers as well as local and foreign investors by bringing in long-term domestic and foreign capital flows. With REITs regulations coming into force, investors have much to look forward to in terms of transparent pricing, which will be a refreshing change from pricing based on speculation. As a new source of finance and income, REITs will benefit developers to own and manage assets with a long-term view as well as monetize their assets and use the funds to complete their cash starved projects. Retail investors will be incentivized to diversify their portfolio and benefit from regular income and capital appreciation of real estate. It is also expected to provide impetus for fresh boom in construction, which will help absorb labour migrating from the farm sector and boost the economy.

The operationalization of REITs holds out several promises such as:

1. Give developers easier access to funds and create a new investment avenue for institutions and high net-worth individuals, and eventually ordinary investors. The introduction of REITs will provide a new source of cash to Indian developers while giving investors the ability to buy into the country’s property market.

2. Creation of new investment channels in the real estate and infrastructure sector. REITs will reduce the cost of business for both local and foreign investors. It will help ease liquidity for developers and provide access to retail investors to benefit from regular income and appreciation from real estate.

3. If done properly, REITs will change the landscape as it happened in 2005, when foreign direct investment was allowed. Now, we can hope to see sovereign funds coming in.

5. REITs may help unlock as much as $20 billion of listings. Assets that may qualify to be included in REITs may reach $20 billion by 2020, according to an estimate by property consultancy Cushman & Wakefield. In the first three to five years, as much as $12 billion could be raised.

6. REITs will help to inject transparency at least in the commercial sector, lower the reliance on financing from banks, and incentivize developers to own and manage assets with a long-term view.

7. It will encourage investors to pool their money to buy real estate such as shopping malls, office buildings and rental housing.

8. REITs will help India’s real estate market become more institutionalized.

9. It will help free up capacity for a new construction boom which will give a boost to India’s economy.

Build more integrated Townships to decongest our Metros

Large cities are getting over-crowded under the relentless march of urbanization. An estimated 160 million people have moved to India’s cities in the last two decades, and another 230 million are projected to move there within the next 20 years. The exponential rise in the number of city dwellers is leading to an ever-increasing demand for housing and urban infrastructure. At the same time, the massive influx of people has strained India’s urban systems to the point of breaking down, creating massive slums with inadequate housing, sanitation, basic services and security. The 2011 census indicates that there are 14 million households (or approximately 70 million people assuming an average household size of five people) living in slums in India’s cities.

To cope with this demographic pressure, all our bigger cities are stretching their boundaries. The extension of the traditional city limit is spurred in large measure by the expansion in real estate activity to accommodate the bulge in population. Even the new master plans for all major cities are being rejigged to facilitate the expansion of city limits.

To ease the pressure on big cities and improve the quality of urban living, town planners and policymakers are encouraging the setting up of integrated townships as an effective development tool for building infrastructure in the newly marked spaces beyond traditional city boundaries. Setting up of self-contained integrated townships in a decentralized manner offers a sensible solution to providing a more holistic living environment and preventing the proliferation of unplanned urban villages. In fact, integrated townships bring a raft of value propositions such as affordability, convenience, and a relaxing lifestyle in one very attractive package to modern urban planning and development.

As these townships have functional linkages with mother cities, surrounding areas and towns, they are better able to address the pressure on urban areas and its infrastructure and at the same time fulfil the need for higher residential density in the outlying areas of bigger cities. Varying in land use and size ranging from 20 acres to over 1000 acres, what also sets them apart is their unique and seamless blend of residential, commercial, industrial and retail features, which offer a holistic and sustainable urban development model.

Most integrated townships have at least 25 per cent of the total built-up area for residential use with the rest of the land parcel housing offices, commercial centres, clubs, schools, etc. However, there is no standard definition of integrated townships from a regulatory standpoint. Different states define integrated townships differently. Gujarat, for instance, has a policy that encourages development of six different types of townships: technology parks, education-based townships, medical and healthcare townships, tourism-related townships, logistics parks, and residential townships. The policy requires 80 per cent of the built-up area to be developed for residential use, while making housing for economically weaker sections (EWS) mandatory.

On the other hand, Maharashtra, which was the first state to come up with an integrated township policy back in 2004, requires such projects to have a minimum spread of 100 acres. However, a new policy to help develop integrated townships outside congested city areas to address the problems of population density and the real estate crunch is in the offing and would most likely be announced by the new government after the assembly elections in October. Probably, taking into consideration the pressure on land availability, Maharashtra could be looking at relaxing the minimum land requirement criteria.

For instance, the Haryana government has come forward to promote integrated township projects by proposing the easing of development norms. The relaxation of the land requirement norms by many state governments has encouraged developers to come up with more integrated townships. The Central Government has already opened the doors for External Commercial Borrowings (ECBs) in integrated township development. The easing of the FDI investment parameters for the real estate and construction sector, which is currently underway, would further help to create a more conducive investment environment for the growth of more integrated townships in India.

Now that the focus of the government is firmly fixed on providing “housing for all” by 2022 and promoting affordable housing across major cities of India, it makes eminent sense to develop and build integrated townships. Today, when even some of the big city corporations are scrambling for funds to maintain and improve their local urban amenities and infrastructure development, promoting the idea of integrated townships can help solve many of our urban development problems.

That explains why such townships are coming up in a big way on the outskirts of cities like Delhi, Mumbai and Bangalore. Even some 3-4 years ago, there were more than 200 integrated townships covering more than 200,000 acres that were under approval for planning and construction especially around the four metros, according to an infrastructure report by IDFC. In recent years, a number of integrated townships have come up or are under development in the NCR agglomerations of Gurgaon, Noida and Greater Noida.

Real estate analysts and consultancy firms such as Jones Lang Lasalle predict that over the next 2-5 years, most metros and satellite cities are likely to see increased launches of integrated township projects. Even Tier II cities and state capitals which see the population from the interiors gravitating towards them are also likely to see such projects being launched. A report by McKinsey states that there is a need to build around 20-25 new townships closer to 20 metros and cities across the country.

Blogging can help Real Estate firms stay ahead of the Competition

The world has become hyperconnected – a global village where people and business communicate with each other instantly, where the Internet and its associated services are accessible and immediate and where machines are equally interconnected with each other. This hyperconnectivity and superabundance of easily available information is redefining relationships between individuals, consumers and enterprises, and citizens and governments.

Quick and fast dissemination of knowledge and information and the quantum jump in their magnitude is changing the way people make decisions today. This has brought about a profound shift in the way consumers and business interact. According to the findings of various studies on consumer behaviour, buyers today are making a higher level of product research than ever before. On the other hand businesses, in a bid to engage more deeply with consumers, are trying hard to put out quality and relevant information, not only about the products and services they sell, but such information that helps consumers to become smart buyers.

A powerful and proven way for businesses to reach out to their customers is to embrace blogging, which is the art of creating short-form online content. The blogging approach is based on the strategy that if businesses deliver consistent, ongoing valuable information to buyers, they will ultimately reward the companies with their business and loyalty. As business enterprises and organizations try to become more customer-centric, blogs that were once devoted to products or services and were mainly company focused are becoming more focused on the consumer. What it means is that instead of pitching only products or services, companies are delivering information that makes their buyer more intelligent.

It is therefore not surprising that business blogs are going all out to engage with customers. Companies, especially the more consumer facing ones such as those in real estate, are climbing on the blogging bandwagon for disseminating content that offers valuable information and insights to current and potential customers for the purpose of building trust, branding, awareness, and positive sentiment. The rationale is that a successful blogging platform establishes a company as an expert in its field, and that sets the groundwork for a long-term business relationship.

Blogging is especially useful for consumer facing business like real estate where gaining credibility and trust of customers can help a developer win a larger share of the available market than its competitors. Blogs help to build trust and establish rapport, which make it easier for buyers to justify purchasing your product. This aspect is all the more pertinent for the real estate industry, where accurate data and reliable market information is not easily available. Against such a backdrop, a real estate firm that brings out well thought out and informative blogs stands to become a trusted source of information. Apart from educating consumers, well-written articles reflect your position as a leader in the real estate market. When you post articles that are informative, you are using your blog to share your credibility and expertise.

Blogs also provide an additional source to connect with your clients by encouraging consumers to share your content with their networks. This helps to drive traffic to your company’s website. The more traffic you have visiting your site, the more likely it is you will make a sale or score a new customer. People are also more likely to buy products or services from businesses they feel they “know.” When they connect to your website, they will be able to get to know your business and as a company you will be building a strong customer base for your products.

For a real estate company that provides relevant information through its blogs, clients are more likely to contact the company concerned when they are ready to buy or sell real estate. This way, a real estate blog can serve as another efficient platform for increasing conversion rates by lifting the level of consumer interest and engagement from ‘’passing’’ to ‘’involved’’. Customers that you have helped inform and educate will be more willing to listen and consider your advice when making purchasing decisions.

An analysis of a Marketing report in the USA done in 2011 revealed that 27% of respondents rated their company blog as “critical” to their business. While consumers continue to tune out traditional, intrusive marketing communications, they increasingly crave the type of genuine, customer-focused information that well-written blogs are more apt to deliver.

A survey done in the US has revealed that 87% of businesses that blogged at a consistent rate in 2013 reported new customers directly from those blog posts. So to make business blogging a major part of a company’s marketing strategy makes all the more sense if it is looking to attract new prospective customers or turn customers into evangelists.

Today, with 33% of internet users report reading blog posts and that number climbing fast – according to a report – companies are tweaking their marketing approach and embracing blogging as a way of creating and distributing valuable, relevant and consistent content to attract and acquire a clearly defined audience – with the objective of driving profitable customer action.

However, just creating a blog post or an image as a one-shot deal is not going to help. Think of it as an asset that you are investing in. You can then leverage it in multiple ways to get good returns from it. As discussed above, the many benefits that can accrue include:

  • Positioning your brand as an Industry Leader
  • Developing customer relationships
  • Increasing traffic to your website
  • Increasing your search engine optimization results and rankings
  • Building trust