Track2Realty Exclusive: Till very recently, unlike several other industries, real estate used to take a back seat in times of a sluggish market or when there was some controversy around. Any negative market sentiment or slowdown more often than not led to newspapers’ property supplements growing thinner and vacant hoardings in and around city becoming common. Prima facie it was seen to be a sales driven exercise where real estate companies’ approach has been to advertise for selling their product and not creating a brand icon. But that seems to be only half the truth in today’s context as the sector is doling out more money for advertising despite slowdown.
Track2Realty Brand X Report 2013-14 feels the sector has learnt with trial and error that it is very vital to have the continuous branding in the market even though a project is sold at the time of launch itself. It will help as brand recall value when the next project will be launched.
Newspaper advertisements, television commercials, billboards, radio jingles, B2B events and cinema…it seems the Indian real estate has gone over-board to capture the attention of the home buyers. Are we really reeling under the slowdown? Going by the advertising and marketing push of the real estate developers during the last one year one wonders whether market slowdown is more a case of mind over the matter.
The fact, however, remains that in a bear market most developers are not inclined to hibernate like bears as a strategy for self-preservation. Be they a DLF, Raheja, Purvankara or Sobha, their modus operandi seems to borrow from feline superstition: if they have nine lives, they are going to spend them all building or go bankrupt trying.
As a result, the developers are spending heavily on advertising and branding to ignite marketing than resign to the fate and wait for the economic turnaround. Facts speak for themselves. As per the TAM data the ads jumped 30 per cent on television in the first six months of 2013, compared with the same period last year. The industry estimates suggest nearly same level of increase in ad spend has been noticed with the print media as well during the year. This raises a fundamental question as to whether this is reflective of rising inventory and hence distress among the developers.
A section of analysts tracking the property market don’t think so. They believe in times of real distress either the developers resort to freebies & discounts or the property prices simply crash. That is not the case in many of the major property markets across the country. Others believe as the market is down the inventory is rising up, it has become difficult for the developer to push on sales by purely giving discounts and freebies to customers. Higher brand value is actually helping developers to create higher sales as compared to developers with lesser recall value. After all, the customers do not wish to buy property with lesser known developers, and the brand value that identifies trust factor is paramount.
Moreover, contrary to the general perception that the desperate need to sale is leading the developers to advertise at the project level and sell quickly, a thorough study on the advertising done in the 20 key markets indicates ad spends are both brand specific and project specific. In any case, the creatives also suggest that both are aimed at enhancing value for the brand. The developers maintain that it has always been felt that slow moving market actually needs more ad spends for sales. Even if a developer is cost conscious to spend in proportionate to sales, the ad spends are nowadays being planned to not only increase the sales but also to create a brand value.
The country’s largest developer DLF maintains that slowdown has been over-projected in the media, and hence such apprehensions with the ad spend of the sector. DLF spokesman Sanjey Roy says that market is witness to a healthy transaction, but only for the developers who are offering right product in the right market at the right price point. They are the developers who are advertising irrespective of the overall sentiments prevailing in the market.
“Every adversity also brings opportunity and the developers who have learnt their lessons well are the ones who are back in the business with fine balancing of sales and marketing activities. Yes, the slowdown might have hurt some of the companies more than others, but from the perspective of advertising and branding of the sector, seasoned players with good track record are advertising the way they used to, forcing serious newcomers in the ring to match in order to get noticed,” says Roy.
Rajesh Vardhan, MD, Vardhman Group maintains that there is slowdown in the sector, but the marketing activities done for the projects will never slowdown. It is seen from a long term perspective and with the marketing of the projects the companies are creating their own brand value. This trend remains the same whether it is bull market or the bear market. He maintains that the developers have seen the worst period in this sector, so it is bound to see better times.
“Building a marketing strategy requires looking at the whole picture; it is not just about increasing sales, but to create greater recall value. There is a need of creating a strong brand value. Such brand building activities then help the developer to get better prices for their property. It also creates a good perception on the buyers’ side. Developers now believe in carrying a strong brand image in this sector,” says Vardhan.
Critics though maintain that the biggest challenge for any developer today is not just the prevailing market sentiment but the ‘perception’ of a ‘greedy builder’ who won’t be able to deliver, and hence increasing focus on branding. After all, when the market was bullish every Tom, Dick and Harry had this grand vision of being a developer and wanted to get into the game, whether their background was law or construction or media or medicine or just nothing. And there was no velvet rope to keep them out. Cash was easy to come by, inventory was being absorbed at miraculous rates, and irrational exuberance was the order of the day. And then the market fell off a cliff overnight.
So, the tactics that many of the developers with not so years of brand reputation adopted to remain solvent and relevant while they weathered the slowdown blues. Some others got back to the drawing board and focused on rescuing orphaned projects. The term ‘vulture real estate’ got thrown out and all out effort is now being made to get rid of the perception that they are just in it for the money. More importantly, the message that they want to be spread is that at least they have not gone belly up and still have the capacity and capability of execution.
Rahul Gaur, CMD of Brys Group maintains that the slowdown has also brought an end to gimmicks; credibility is being rewarded, and although the sector is witness to a new wave of advertising, it is rooted in a rationality that did not exist in the last cycle. People also understand that in a market with more transparency now and such tighter lending restrictions, only the best developers are still able to play the game.
“Though ad spend has increased our business model is to keep it realistic and not get overexposed like a lot of developers did in 2008-10 when things were frothy. You could see the writing on the wall as there were signs of trouble with the economy nose diving, lending getting tougher for the developers and the interest rates shooting up. There was not too much cheap money floating around; land prices were going up; and developers were starting to use margins they were not comfortable with. Now those developers who have weathered the crisis and have got wiser are the ones back with advertising bang with the realism that to brand and advertise does not mean selling the project instantly,” says Gaur.
A section of analysts agree that now the developers are picking the plan they feel is the most sustainable, with many even having the mentality to hold on through the bottom of the cycle, knowing they would have something solid to sell into a rising market once the crisis is over. Lalit Kumar Jain, CREDAI Chairman says in real estate brand is always built with delivery. Prompt delivery, transparency and meeting the promises made are always on top of the minds. However, with the rising competition, globalisation and virtualisation, consumers now have wide options and hence so much focus on the advertising and branding.
“We developers are creative in our own ways with newer designs and features. We have to keep reinventing the wheel to keep up customer satisfaction levels. These do reflect in our ad campaigns. In a weak market strong brand sales better due to reliability. Every crisis offers an opportunity to bounce back with added energy. A proper branding activity will play an important role. Nobody wants to take risks when the markets are weak. Reinforcing brand values helps maintain trust among customers. During this phase benefits from advertising are bare minimum, but it always helps in keeping us afloat in customers’ minds,” says Jain.
It has often been argued within the sector that in times of crisis, matured industries like FMCG (in the event of anti-cola campaign) get into a dynamic mode to take the bull by the horn. The realty companies were not doing the same till very recently. If there was a crisis in real estate and business got sluggish, developers generally waited for the market to return back to its bullish cycle. So, the companies used to wait and watch for the right moment to take the marketing communication across. That era of over-cautious pessimism seems to be over. At least the ad spend of the sector in the last over a year’s time seem to suggest so.
