A few may have succeeded but most of the developers have failed to position themselves right during the slowdown. In the process Track2Realty finds that the brand realty has taken a severe beating, losing the trust of both the end-users and the investors. The brand positioning that differentiates between the two different realty companies is today negligible with developers’ focus to sell. That, unfortunately, is not working for them and commanding premium over the brand reputation today is a far cry. Our team speaks to a cross section of developers, analysts and brand experts who may differ with each other but nearly all agree that sector has to come out of the Catch 22 situation.
A Mumbai-based developer launches a skyscraper super luxury apartment with obvious sky high ambitions. After much fanfare and bombardment of advertising campaign followed by road shows in foreign countries and inviting the NRIs, HNIs and other big ticket investors suddenly the company goes into a silent mode. Repetitive attempt by the media to reach to the developer does not meet with any success, thus lending credence to the speculation and conspiracy theory of project not taking off as expected.
Some critics even call it the company’s ploy to raise capital through high pitch campaign and then go silent once the objective of generating the interest level of investors is achieved.
However, this is not the only case study that is symptomatic of the emerging market reality of the Indian real estate during the slowdown. Another developer in the Delhi-NCR launches a number of sky high super luxury apartment one after the other, making too much media noise with big ticket ad spend. On ground none of the projects promises to take off the way it is being projected in the media space. Critics even question the rationale behind creating destination address with luxury apartments with more than one offering in the same micro market.
It seems the desperation level of the developers in the Indian property market is an all time high. Since some of the leading companies have weathered the slowdown challenges with shift of focus on the recession proof buyers in the luxury segment, the rest of the lot with no experience and expertise are also trying to replicate the same format. However, most of these companies fail to differentiate between successful companies in the luxury segment and their novice attempts to emerge one-the brand value that the large players with a proven track record of delivering on the luxury front.
Facts speak for themselves. What is selling more in the slowdown, luxury, is also over-supplied, over-used and abused segment with an inventory that is way beyond their capacity to hold when exposed to slow moving market. In this process of trial and error, the brand real estate has taken a severe beating in the last over a year’s time. A sector with a baggage of perception issues has of late invite poor projection as well, thanks to the collective failure within the built environment in terms of its strategic shift.
The larger players in the sector may not have been dented the way the mid size players with less brand recall value have suffered, but the sector in the collective consciousness has definitely taken a severe beating. Though the sector seems to be unanimous in dismissing any such setback, the denial mode of the developers have not helped in changing the crisis of confidence towards the business of real estate in this part of the world. Not only the investors are apprehensive towards the Indian market, even the buyers are not impressed. And hence, this confusion is rather eroding the brand competitiveness of the sector and to make the matters even worse the developers are too focussed in positioning their advertising campaign to sell the inventory than improve the brand quotient.
Requesting anonymity a Mumbai-based developer agrees that the strategic mistake and the wrong brand positioning have brought the sector to a level where the developers are being forced to repeat their past mistakes. According to him, with inventory rising and liquidity squeezing in the sector there is hardly any room for experiment and innovation but to focus on the sells figure. And when all efforts to dispose off the inventory fails, the developer gets confused whether to rebrand/reposition the project or simply wait for the tide to be over.
“This fiscal has been really challenging but the focus of the developers is still not in the right direction. I do understand that in such a slow moving market there is hardly any room for spending on the brand, nor do all the developers carry a legacy, but what I find objectionable within our community is the desperation of the developers to be seen different through fluff and not substance. If the companies who enjoy a legacy of successful delivery are still having a decent business, so can new comers if the developers focus on delivery and meeting commitment to the buyers than spending on new innovations to get noticed,” says this developer.
There is a school of analysts who believe the developers’ rigidity to hold on the prices is doing them no favour and actually eroding the brand competitiveness as well as the future projects. However, most of the developers disagree with this. Though on the face value they maintain that the prices have bottomed out and there is hardly any scope to cut the price, fact of the matter is that many of these developers have been discounting heavily through the sells channel.
Some of them have increased the brokerage up to 6-15 per cent, depending on the market and the project, there are others who are giving a free run to the under writers, often the full page advertisement being shared equally with the marketing agency, and in some cases even restructuring the market offer as per the directions of the under writer. This is a suicidal trend for the brand value of the developer as it often is translated as developer hiking the price for no rhyme or reason while the under writer sells it on the lesser price that is on offer by the developer. An analyst keeping a track on the sells channel of projects maintain that while all the marketing tricks are being played to sell, the developer does not want to straightaway offer a price cut to the market as it would be seen as the distress sell affecting his future projects as well.
The realty major DLF does not agree with the premise that the brand realty has taken a beating in the slowdown. DLF spokesperson maintains that like any other business weathering a market slowdown the real estate too is showing the similar pattern of negative growth for some while others are having a better sales figure. According to him, replicating the successful model of leading companies with years of proven trust, credibility and reputation can not be the way forward for new comers who have to build the brand in challenging times.
“Real estate is a micro market business with each market having its own pockets of influential players. Many of them a doing a decent business even during the slowdown as they have created a niche in their own pockets of influence. Then there are national players who have years of successful, timely and quality delivery in multiple cities who command a broader trust and goodwill of their brand. The slow moving market may affect their bottom lines a bit due to buyers’ negative sentiments but it definitely does not affect their brand competitiveness,” says the spokesperson.
Does it mean the new comers in the ring have to wait and watch for the market conditions to improve? More importantly, have they weathered a setback beyond repairable hurt? The analysts maintain that some of the companies with better finance, cash management, delivery and years of brand legacy may not have been hurt like the rest of the developers, but by and large there is a serious crisis of credibility as far as brand realty is concerned.
With economy not picking up, investors losing confidence & patience, policy makers suspecting the sector, financial institutions having burnt the fingers and buyers expecting a crash, things can not go even worse for the brand real estate in India.
It is not that the brand realty going for a toss necessarily means the developers with less brand recall value resigning to their fate. As a matter of fact, and many analysts tracking the sector agree to it, slowdown has also given an opportunity for some of the late movers in the business to learn from the mistake of others and do something differently to lay the foundation as a developer with a different mindset and approach to the business of real estate.
Brys Group has launched a super luxury project Brys Buzz in the Noida market, know more for affordable segment of housing vis-à-vis its rich peer in Gurgaon which has been the land of luxury and ultra luxury projects. The company believes in the philosophy of creating a destination address is possible only when the developer has the extra courage and thorough research in hand to develop a destination than merely replication same kind of luxury projects in the same market.
Navneet Gaur, Director of Brys Group says the perception of the real estate sector losing its competitive edge and brand realty taking a beating has its genesis in the way the projects are being conceptualised. According to her, in a bullish market projects sell on its own as housing is a demand driven asset class but in slowdown the developer must do his due diligence in terms of thorough research on the market, the product and the buyer if one does not want to damage his project’s prospect and brand reputation.
“Slowdown is also the time when the right buyers are looking for right projects in the right market where appreciation is on the cards ahead, instead of getting into the saturated markets. For us slowdown proved to be a good launching pad since we customised a unique loyalty programme for the buyers. We are also conscious of the fact that advertising alone does not work in a market where deals are few and far between, and it has to be supplemented with PR, word-of-mouth publicity and overall creating an experience centre than pushing for the sells. More importantly, good brand management is not possible without good project and equally good financial management of the company,” says Gaur.
There are other developers who assert that slowdown affects the economy in general and all the industries feel the pinch, and hence the real estate alone should not be blamed for not weathering the slowdown blues successfully. Rohit Gera, MD, Gera Developments asserts that during times when sales are slow, it is essential to deliver projects even more aggressively with adequate cash flows in place to ensure that construction speed is maintained so that customers confidence is built and maintained. Also, faster construction with adequate funds being available leads to better purchasing power and better deals for the developers. Ultimately, it is the product that builds the brand. During the difficult times, customers look more closely at the product.
“Strong financials are essential to a company’s brand equity. Having funds to tide over periods of slow sales, to ensure that one does not have to resort to cutting corners to complete the projects, to deliver the project as promised to the customer are key to brand reputation. Ultimately, the customer is the strongest source of building a brand. Ensuring that funds are available for the developer to complete the project as promised is always critical. In fact this is the best way for customers today to assess the capability of a developer–check the progress on the site, progressing of the work each month, checking project’s timelines whether ahead of schedule or behind,” says Gera.
There are others who convince that there are already a number of very well established brands in the real estate space. One of the big challenges in creating a super brand is the nature of the product. Real estate is not in the consumer goods space. Repeat purchases are very low amongst our customer and even if they do happen, the gap between the purchases is very large. Real estate is also a more localized business and as such, synergies of advertising on national television etc are not available. All these things make it difficult for real estate to produce super brands.
However, this school of developers who vehemently defend the sector with the nature of localised business often fail to convince when reminded of the global brands in the real estate spaces. What is even more important is that many of them are looking forward to have a global partner like say Donald Trump to tie-up. The question is whether there is any learning for better brand positioning in times of crisis.
Arvind Jain, Managing Director, Pride Group says in most Indian cities, reputed developers have maintained consistency in these aspects and are even raising the bar on best practices in construction design, quality and business transparency. According to him, it is often assumed that Indian property buyers are more focused on budget than brand value. This is a glaring miscomprehension of the ground realities. In fact, few consumer classes are as attuned to the value of a brand than Indian homebuyers. Moreover, developers have been responding to this trend by making best practices in their offerings as well as business operations as an integral part of their manifesto.
“This focus is a natural consequence of the need to remain relevant in a highly competitive market. This explains why certain brands command a greater degree of trust among consumers than others. The fact is that real estate as a business, from construction to marketing of the end product, is one of the strongest contributors to the country’s GDP. Brand loyalty is certainly not missing in Indian realty. This is amply evidenced by the fact that certain brands command instant attention while others do not even register on buyers’ radars unless questionable marketing ploys such as marked-down rates in exchange for inferior quality and location come into play. In India, home buyers are very aware of the fact that some developers can be expected to deliver on their promises, while others represent a potentially costly gamble,” says Jain.
Many within the built environment maintain that it is all due to the image makeover of the sector why the more reputed developers have no problems with obtaining domestic as well as international institutional financing for their projects. They crib that the image that has been created about the real estate sector in general is a media business to portray the entire real estate domain in a negative and mercenary light. This is at a time when the Indian real estate is becoming a force that even global players are beginning to take very seriously.
A section of the analysts maintain that the sector is already witness to a process of consolidation wherein smaller players are merging with or selling their stakes to bigger brands, since these banners of repute are able to sustain their businesses as a result of their larger market share, higher credibility quotients and their superior funding options.
However, not many would agree with this at a time when despite of being a better pay master the Indian real estate fails to attract the best of talent and the sector suffers from a perception issue when it comes to the youngsters making a career choice out of it. Moreover, realty market continues to get worse in the slowdown not just in terms of pessimistic mood but generally in terms of overall realty sentiment index. All parameters including economy, residential launches, sales, price appreciation, new office supply, leasing volume, office rental appreciation and funding indicate pessimism for the brand realty.
