A luxury developer from Bengaluru posed an interesting question. “What is the future of smaller developers when big brands such as Supertech are collapsing?” I shot back with a counter question, “What is your definition of big players?” His response was that only those in the volume game were the big daddies of the real estate space.
Can real estate developers like Amrapali or Supertech be referred to as big players? How do you benchmark them? Is volume the only criteria to evaluate big players? Is it topline that defines the biggies of the business?
Moreover, some of the developers operating out of Delhi-NCR are playing in volumes because of the rock-bottom prices at which they had bought land. In Noida, the much-maligned deferred land payment policy made many small-time builders look big by playing the volume games. They are now collapsing one after the other.
Claiming to deliver 5,000 units or 10,000 units in a year conceals more than it reveals about the real performance of the developer. It does not spell out how many units were launched and how many are behind schedule. With majority of the volume game players in the business of real estate not being listed entities, it is not in the public domain as to how far they are fiscally over-leveraged.
It’s also not true that big players have not been defaulters. Big players may have greater brand recall but that does not lead to brand goodwill by default.
There are three factors that define big brands. The first being fiscal efficiency and impeccable track record. Is the brand safe to invest? No wonder, most such biggies in Indian real estate are listed entities. Their stock performance is a reflection of the market trust in them.
Execution efficiency also defines what a big brand is. Track record of timely delivery is important. It has nothing to do with volume play or how many units have been delivered. Most brands are conscious of the backlash in case they were to bite more than what they can chew.
Operational efficiency is also important. A buyer can forget the long years of wait, the delayed lifecycle of home acquisition, but not the experience during and after possession. A seamless handover process and after-sales service and maintenance go a long way in establishing the developer’s credentials.
It is hence, no surprise that a number of reputed builders have reinvested in their already delivered projects. Once the handover is done, the responsibility of society upkeep rests with the Resident Welfare Association (RWA). However, the bigger brands collaborate and lend a helping hand to the RWAs. This works better than any other mode of publicity, brand goodwill, word of mouth, referral buyers, and the developers’ overall client acquisition cost. The volume game players largely do not have that bandwidth or intent to serve clients as a service industry player would do.
Last, but not the least, government agencies and the Real Estate Regulation and Development Act, 2016 (RERA) have to emerge as the real watchdogs of the real estate business. They have to monitor that developers do launch projects beyond their execution capabilities. Only then will the volume players continue to remain the biggies of the real estate business.
(The author is CEO and Managing Editor Track2Media Research Pvt Ltd)