Dissertation on Recent Trends in Real Estate Marketing in India
Literature Review and Research Design Help in Real Estate Marketing Topic
Questionnaire and Data Analysis Help from Professional Statistics Experts
The
Indian real estate marketing scene was characterized by a lot of hectic
activity during the last three years. Land value across the entire
country—metropolitan cities and smaller towns—registered a phenomenal growth.
Several factors encompassing market research, pricing, branding, advertising
and promotion, coupled with web-based marketing, made a heady brew that
resulted in soaring land and apartment prices in the recent past. This is a
classic example of the integration of all the three ingredients—creating,
communicating and delivering value—which mostly revolutionized the thinking of
young professionals with a lot of expectations and earnings. These young
professionals are the main customers behind the real estate boom.
Indeed,
a consistent growth rate of 8-9% in the Gross Domestic Product (GDP), along with
increasing levels of income in the business and IT sectors, has led to the
present situation. Not only the housing, but also the office, commercial and
retail business, hotel rooms and mega stores including shopping malls and hyper
markets are in this picture. Some estimates indicate that the market is poised
to grow by over 30% during 2005-2010 and may reach a whopping $50 bn or Rs.
2,20,000 cr. About 20 million new housing units are likely to be created in the
next five years. A fivefold increase in office space is also envisaged.
Organized retail all over India will require 200 million sq.ft. by the end of
2010. Not only that, a great demand for at least 50,000 new hotel rooms in the
next five years is emerging, and the hospitality sector looks forward to
attaining the target.
Occupancy Costs
All
this is familiar stuff for avid real estate watchers. However, what may be
construed as a paradoxical situation, has now arisen when one looks at the
demand growth across a few cities. Some experts believe that a sort of
oversupply is detectable but at the same time there is no reduction in demand.
This implies that all stakeholders—developers, investors, customers or those
who occupy the property are affected. Keen observers of the scene desire the
following aspects while examining the way in which metros are responding to the
situations: the rentals are coming down in the outskirts like Whitefield in
Bangalore where the supply is outstripping the demand, but increasing in
locations such as Guindy in Chennai, Navi Mumbai and Salt Lake in Kolkata. An
‘overheating’ effect is perceived with greater demand and rise in rents when
one considers Connaught Place and Gurgoan in Delhi, MG Road in Bangalore, Park
Street in Kolkata, and Hitech city in Hyderabad. The rents remain stable in
places like Noida (Delhi), Lower Parel (Mumbai), and Gachibowli (Hyderabad).
This
has several implications for occupiers, developers and investors. In almost all
the cities—Delhi NCR, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad and
Pune—high occupancy costs for companies (occupiers) have been noted. For
developers, the situation looks dicey. They avoid the overheated markets as in
Whitefield in Bangalore or they drift towards the suburban areas for residence
on account of lower rents in the case of individual tenants and reduced costs
for those who want to buy property. Fresh investments do not seem to be coming
at the same rate as two years ago. The returns on investment for private equity
players are not very attractive. There are, of course, minor variations across
the cities considered earlier, but one thing is clear with the economy staying
quite strong and the banks and other lending agencies willing to give money
albeit at higher rates, there is no need for alarm.
Corporate Real Estate
In
this context, the place of real estate in the corporate sector deserves greater
attention. Actually, corporate real estate “includes real properties that house
productive activities of a corporation and the primary business of the firm is
not related to development, investment, management or financing of real estate
assets”. It includes space for administrative and management functions and also
for manufacturing, warehousing, selling/marketing and distribution activities.
There is a section of opinion that corporate real estate is a ‘forgotten asset’
in the sense that its “manifold use and contributions to the well-being of the
corporate organization are not recognized or given due recognition”. However,
recent trends indicate corporate real estate is coming into its own.
In
this context, the focus is on the entry mode of international developers—by
themselves or in collaboration with their Indian counterparts. As can be
expected, developers with good international track record manage to do well in
this scenario. There can be no doubt that in a good stable economy like that of
India, players with good credentials— Jones Lang LaSalle Meghraj (JLLM) have
made a comparative study of the rent and capital value growth of top-tier
markets in India and China during the past three years. The study concludes
that growth in India is not as high as in Tier-1 Chinese cities like Beijing
and Shanghai. But, it must be noted that the Chinese have focused on the infrastructure
development in a better way than India. Also, the Chinese have been following
policies that promote foreign investments.
Land Acquisition
Land
has become a valuable commodity in any country whether in the form of small holdings
or large tracts. Real estate developers and investors find it difficult to
purchase land at a reasonable price. Now, the emerging trend is to create
townships with all amenities for residents. The question of acquiring large
parcels of land has been agitating the minds of developers for some time in the
past. Obviously, the developers must have strong financial muscle to buy land
for mega projects such as townships and huge apartment complexes. But,
acquiring, say, 100 acres of land is not easy due to fragmentation, which
resulted in many people in the contemplated project area owning it. Usually, it
is agricultural land with several owners in possession of the land. The Urban
Land Ceiling Act has made the process even more difficult. There is also the
danger of political interference through government intervention. In some
places, the farmers get together and form cooperatives—in Pune for instance
nine such cooperatives have come up.
Another
significant point to be noted here is—the developer must care about the area
adjoining the project designed for luxurious villas or apartment complexes. Otherwise,
socioeconomic disparities will create tension. The infrastructure in the villages
around the developed apartment complexes must be improved and the builder must
earmark a portion of his budget for this purpose. The real estate marketers
have to lay stress on this aspect also. “When you are spending $1 bn or Rs.
4000 cr on a huge construction project, then you have to spend Rs. 4 cr on the
infrastructure of the gram panchayat which was the original owner of the land”,
says Aniruddha Deshpande, Managing Director, City Corporation Ltd. In his
opinion, townships in India will become factories producing houses which will
“bring down the developers’ margins from obscene highs”. The problem faced by
people residing in poor conditions outside a luxurious township is not due to
financial disparity but it is on account of the ‘infrastructure divide’.
Indeed,
the key drivers in the growth of real estate marketing in India are Information
Technology (IT Parks/Offices/Campus), the purchasing power and propensity to
spend by the middle class (close to 200 mn) in the context of a young
demographic profile (shopping centers, mega stores and malls), and reduction in
housing mortgage rates (housing/residential). One may also add to this
list—increased tourist arrivals and business travelers (real estate impact
relates to hotels and serviced apartments), and a revival on manufacturing activities
of varied enterprises (the impact is on industry, logistics and warehousing).
Global Majors in the Real Estate Market in India
According
to a study by the Consultants JLLM, foreign investment to the tune of $10 bn will
be injected into the Indian real estate market during the next 12 to 18 months.
International companies like ‘Ayala’ of the Phillipines, and ‘Signature’ from
Dubai have indicated their interest in entering the field. Also, on the cards
are sizable Foreign Direct Investment (FDI) flows from Malaysia followed by the
US, UK, Israel and Singapore. Stemon Group is a Dubai-based real estate firm
which has stepped into Mumbai’s booming real estate with Rs. 1200 cr huge
project of Mumbai-Pune express highway near the proposed new Mumbai
International Airport. Sternon has customers in 28 countries and is marketing
this project with vigor in overseas markets including the Gulf. There is also a
marketing tie-up with Garnet Construction Ltd., a publicly trading Indian real
estate developer.
According
to industry sources, over 90 foreign investors are already in India tapping avenues
for investment. Nearly two dozen US Funds raising a huge $3.5 bn for investment
in Indian realty have been identified. These include Wall Street powerhouses
like Blackstone Group, Morgan Stanley and Merill Lynch. In mid-2007, Morgan
Stanley closed a deal worth $150 mn with Oberoi Constructions in Mumbai. The
Natsheel Group in Dubai entered into a deal worth $10 bn with DLF for
residential projects in Tier-1 and Tier-2 cities. Similarly, California Public
Employees Retirement System entered India, investing $100 mn in a real estate
fund promoted by IL and FS Ascendas.
How
is it that there is such an avalanche of projects in the country? The main
reason is the change in policies by the Union Government early in 2005,
allowing 100% foreign investment in construction projects with fast track
approvals. In fact, the major attraction for the foreign investors is the
potential investment returns of 25% and more in Indian projects, very hard to
come by in the US and European markets. Significantly enough, FDI in real
estate has grown from $200 mn in FY 2002 to $3900 mn in FY 2007 (nearly 20
times). The international developers and investors collaborate with their
Indian counterparts as joint venture partners.
Resale Property Market
Another
interesting aspect is that the resale property market is also flourishing. Already,
Bangalore has hosted an exhibition on this. According to the CEO of the Marketing
Process Outsourcing Company, such exhibitions are common in the West, and ‘Popmart
Technologies’, a corporate entity, will organize these in five major cities and
this will be later taken to other Tier-2 cities. The property buyers will
benefit since there are several options for them. In fact, the resale units in
major cities accounted for over 30% of the total residential property
transactions. Again, the advantage in such expos is that property buyers and
sellers meet on a common platform, and the direct dealings are bound to be
transparent. The list of good properties on show will be certified by Popmart
and HDFC.
IT Parks, Multiplexes and Megamalls
The
growth of Information Technology (IT), Business Process Outsourcing (BPO), and Information
Technology Enabled Services (ITES) in India has created a strong demand for
creating assets in the shape of IT Parks. In fact, this process has also led to
the building of multiplexes and malls to satisfy the shopping and recreation
needs of a large number of software professionals. The trend is seen in cities
like Bangalore, Mumbai, Delhi, Hyderabad, Chennai, Pune and Kolkata. The major
portion of the development is taking place in the suburban fringe locations.
The malls and multiplex businesses have been on a growth path, thanks to the
demand from consumers for quality shopping in a good ambience with
entertainment facilities.
In
this scenario, the spotlight is on the need to integrate foreign talents (who
are undoubtedly rich in experience in the construction of multiplexes and
megamalls) with the local talents who are familiar with the local ethos. Out of
the 30,000 architects in India, nearly 80% are based in large cities. The
impending large-scale FDI participation in the Indian real estate has spurned
the council of architects to take note of the challenges ahead. Big
international companies like Metrocorp and Jurong Consultants have been active
in the construction of giant IT Parks in cities like Bangalore and Hyderabad.
Another company, DLF is reported to have secured the contract for building
Bidadi Hi-tech city near Bangalore. Thus another aspect of globalization
becomes evident. However, the possibility of the local Indian developers losing
quotations when global tenders are floated exists.
Conclusion
A
notable feature in the real estate scene is that Tier-2 and Tier-3 cities are
also getting attention. Market researchers are led to wonder how long the boom
would last. Though the increase in interest rates for housing loans led to a
plateau level of stagnation, there is not much appreciable fall in the
apartment prices. On account of the current sound economy, it is somewhat
hypothetical to speculate whether the bubble will burst.
In a
milieu, where sales campaigns and marketing strategies are increasingly acquiring
a sharper edge, the buyers are overwhelmed by glossy brochures. The average age
of house buyers has come down in the last few years—from about 55 years to
32-38 years. This fact is highlighted in an analysis by the Associated Chambers
of Commerce and Industry of India (ASSOCHAM) on the trends for buying dwelling
units for self-use. What are the factors that contribute to this trend?
Obviously, they are the high rentals, non-sustainable lease agreements between
property owners and tenants, rising income levels, and the easy availability of
finances.
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