A lot of developers defend their poor consumer connect and grievances of homebuyers with their higher sales figure. Track2Realty delves deeper with a case study of Gaursons to find that a high sales velocity has little, and often negligible, connection with the consumer confidence.
A social networking discussion over the once-reputed brand of North India, Gaursons, losing consumer confidence and brand equity in the market of Delhi-NCR made the marketing head of the company to react sharply, “This is an incorrect assessment. We are the fast selling developer in the market with nearly 350 units being sold in a month.”
It is a different matter in the context of Indian real estate that the understanding of brand custodians is limited to sales number alone. However, in this case the innocuous discussion soon took a different turn altogether as the talking point shifted to whether the higher sales figure is indicative of high consumer confidence or brand goodwill.
A closer look at the given developer, Gaursons and the market that it operates in, clearly suggests that the sales figure is definitely not reflective of higher consumer confidence in the market that is notorious for the lack of best practices.
The choice of the homebuyers, more often than not, in a market like Noida, Greater Noida and Yamuna Expressway, is what has been defined in democracy as opting for lesser evil. With some of the other larger developers by the market size neck down with trouble, a developer like Gaurasons that is sitting over huge inventory is a natural gainer in the region by the law of averages.
Does it anywhere indicate consumer confidence? Unfortunately, no! As a homebuyer in Gaur City, Greater Noida West admits, “I bought it with Gaursons because it was the largest project in this market and I thought it to shape up well. But now I despise the builder and his high handedness in not addressing the pain points. Worse even, he is intimidating when we confront the developer for what is our legitimate right,” says Vineet.
Another homebuyer Sushma Singh is even sharper in her outburst when she says, “What would you make out of a builder who is always surrounded by the bouncers and threatens the homebuyers? I have the feeling of being duped by a builder because I made a mistake of going for the large format project. Large the project and even larger are the issues over here. Smaller builders with limited inventory are doing a much better job in this market.”
As a matter of fact, the buyers of Gaur City have sat on dharna and protest over what they allege is deliberate mishandling of the maintenance on part of the builder. It has escalated to the extent that one YouTube video shows ugly spat between the homebuyers and the Managing Director of Gaursons, Manoj Gaur. In the video the buyers allege that the builder has given them life threat.
Sales number not indicative of consumer confidence with Gaursons
Sales number alone of an unlisted developer cannot indicate consumer confidence
While bragging sales number developer doesn’t reveal launch to sales ratio
Many reasons of high sales number, ranging from more inventory, more brokerage, investors’ connivance or lesser competition
Gaursons’ MD Manoj Gaur threatening the homebuyers have not faded from public memory
Has such media backlash dented the sales velocity of the developer? Well, if the claims of the builder are true then it has not affected the builder at all. Track2Realty does not endorse or challenge the sales figure of a real estate company that is not listed and hence the claims cannot be substantiated.
However, the fact remains that the builder is not out of the business even after intimidating the homebuyers in full public view. In any other civilized real estate market such a builder would have been blacklisted and thrown out of the market. But in this case the builder is rather bragging the higher sales volume than the peer group. It is different matter that his understanding of consumer satisfaction has not grown beyond the sales velocity and balance sheet of the company.
The reason for such a market imbalance in the real estate business is simple: there are so many defaulter builders in the given market that the buyers’ choices are limited. With housing such a demand driven and necessary product the buyers have to go to one of these developers, even if one knows their poor track record of fulfilling the promises, forget meeting the consumer expectations.
The bigger the developer, by the market size and inventory, the more one sells in the given market. Such developers never talk about their launch to sales ratio either. In many cases the higher sales number turn out to be empty bragging when tallied with the overall launch to sales ratio.
Moreover, the higher inventory in a market like Noida is also indicative of poor planning and control of the government agency, Noida Authority. The government’s liberal deferred payment of 10 years for the allotment of land has actually enabled many fly-by-night operators to launch multiple projects in the city.
Most of these builders have failed to expand the business footprint beyond this core micro market, as the government agencies in other cities do not entertain such lax structure. This has been the reason why maximum number of defaults, both financial and execution, has happened in this market only, starting from Unitech to Jaypee and Supertech to Amrapali.
Furthermore, even among the peer group of developers sitting simultaneously over the huge inventory, the higher sales figure is not indicative of higher consumer confidence of the given developer. There are many hidden marketing methodologies that are at play to enable one developer boasting higher sales figure than the other.
For instance, in no other market the developers are in a rat race to offer a brokerage as high as 16% to the channel partners. Needless to add, in a market like Greater Noida West and Yamuna Expressway that could at best be termed as the future locations, the under writers and investors are on prowl. They are the demand drivers and definitely not the end users whose buying pattern, choices & concerns are part of any scientific study with consumer confidence.
Even from the standpoint of marketing strategy, the methodology often appears to be unsustainable. For instance, Gaursons e-mailer invitation to buyers to pay only INR 5 lakh to book the house with no bank loan does not indicate what is the developer’s plan for construction finance. Is it just a trap for the gullible buyers? With this kind of offer, without any hidden trap, anyone can book a house and later sell it before possession to book appreciation profit. But on enquiry, one finds that such the marketing invitations are just temptations to trap the gullible homebuyers.
The developers, like Gaursons, need to seriously introspect whether in a changing market dynamics and new set of regulatory framework they can continue their sales momentum without addressing the consumer grievances. For how long can they brag the high sales volume as their benchmark of consumer satisfaction?
Sales figure of any developer could be quite misleading, and Gaursons is no exception. A developer could be selling faster than others in the given market due to larger inventory, lack of competition in the micro market, higher brokerage, connivance of investors, or all the reasons together. And it is not just the Noida reality where the Gaursons is bragging the higher sales volume.
In a market like Mumbai where the land cost is exorbitant, some of the developers claim to be top developer by the sales figure. The absence of buyer education, objective media assessment, and not-so-transparent nature of the business of real estate often lends credence to such unsubstantiated claims where the statistics are misleading.
It is all the more challenging when the given developer is not a listed company and one has no other means to evaluate and judge the claims of the developer. Sales figure, volume or company’s balance sheets are otherwise indicative of the given company’s standing but statistics alone are misleading and in the business of real estate conceal more than what they reveal.
By: Ravi Sinha
