The world-famous Astro Strategist cum Business Astrologer Hirav Shah has worked closely with many of the leading Developers, Infrastructure, and Real Estate giants of India, USA, etc, and has been actively involved in providing concrete predictions and TIMELINE OF UNSOLD PROPERTIES. Hirav Shah has been a force behind many successes and working with him has the special advantage of confidentiality. Recently he spoke about the state of affairs of unsold properties and what strategies can be adopted to deal with such a scenario.
Hirav Shah says that Unsold apartment inventory refers to all unsold apartments – whether completed or under construction. This is a scenario, in which no Property Developer or Builder wants to be in, reasons being:
- Cash flows are disrupted
- He could use this money to pay out Architects, Contractors, etc.
- He can use it for making other important investments
Contemporary market scenario:
Many industry reports cite real estate as one of the fastest-growing sectors of the Indian economy, which contributes about 5 % to India’s gross domestic product (GDP). Due to the increase in corporate expansion, demand for office space was up 67% for the period of January – March 2020 before the pandemic struck as compared to the same period the previous year. With the rise in housing requirements, demand in residential real estate is not far behind demand in the commercial real estate sector. Currently, the Real estate is the fourth-largest sector in the country in terms of Foreign Direct Investment. FDI in the real estate sector is estimated to grow to US$ 30 billion in the next 10 years.
Despite all the increase in investments and growth in the sector, the problem of unsold apartment inventory persists to a large extent. This could be attributed to the fact that there is a huge gap in demand and supply in the residential real estate sector. For example, the unsold inventory of residential apartments accounts for a staggering 5,15,745 units in Mumbai alone, which made the QTS (quarter-to-sell) ratio 15 till June 2020. The term QTS is used to describe the number of quarters required to exhaust the existing unsold inventory. 15 QTS thus means that it will take approx five years to exhaust the existing unsold apartment inventory of Mumbai if the consumers continue to buy apartments at the same rate.
Regarding unsold apartment inventory, there is another big concern, the difference between the price of existing inventory held by the developers and new launches. NCR is reported to have the widest gap at 31%, followed by Hyderabad at 17% and Pune at 14%.
What are the causes?
When any business does not function efficiently, one of the most visible results of this inefficiency is the lack of customers. In the services industry, this will be visible in reduced interest in the services offered, and little revenue-generating work on hand.
In the case of product-oriented companies (such as real estate development firms), the evidence lies most visibly in piled-up inventory. Excess inventory is generated when a company is left holding more of its products than the market is willing to absorb. Major causes of this could be:-
- Prices are too high so as to entice buyers.
- Infrastructure surrounding the project is not appropriately developed.
- There is an economic slowdown after the COVID pandemic and hence people exercise caution.
Although it’s easier said than done, Hirav Shah lists down some of the strategies that a developer can take to tackle this problem in the best possible way:
1. Don’t let inventory become a Cash Flow problem
It takes anywhere between 2-4 years for the inventory to reach the completion stage, subsequently causing the investment of the developer to pile up in inventory for that period of time. After a certain level, this begins to create stress on the overall cash flow of the firm. Today several Financial Institutions can finance completed inventory between 15-25% depending on the standing of the developer and the status of the project. There are also Private Equity Funds that offer solutions in the form of bulk buying of unsold apartments, sale, and buyback, etc.
2. Consumer’s perspective / Buyer’s perspective
Marketing and selling completed inventory pose its own set of issues and opportunities. The biggest advantage of being better standing of the completed projects in the eyes of the buyers as compared to other under-construction projects in the area. This can transform into both slightly better pricing as well as higher sales velocity. However on the flip side, since the buyers have to arrange for entire financing on their own plus the burden of a home loan at one go, they don’t get the benefit of planning their cash flows over a period of 2-3 years like they do for an under-construction project. Buyers need to be told that they are getting three big benefits due to buying a completed apartment: savings in service tax, tax deduction from the first year, savings in rental assuming they are shifting from a rented place.
The developer should try to reduce the financial burden of the buyer through schemes like giving furnished / semi-furnished apartments, an all-inclusive package deal instead of a per square foot rate, group buying for corporate clients, etc.
3. Reinvent the Marketing Plan
For a real estate marketing plan to succeed in today’s highly competitive environment, there are myriad factors that come into play. More marketing activities need to be deployed than ever before and these new activities require specialized know-how and specifically trained and qualified manpower. Real estate is a product-driven industry, in which the rules of the game have changed drastically over the past decade and will continue to change.
Today, maximizing engagement with the target market is a huge task in itself. For a project launch to succeed, a developer’s clients need to have a top-of-mind recall for the brand and the product. In the past, the resources available to a developer were limited to print advertisements, radio jingles, hoardings, word-of-mouth promotion, and, of course, brokers. Today, clients need to be wooed across a much wider spectrum.
4. Social Media Presence
Not to put too fine a point to it, a developer who does not have a well-defined social media strategy today is a dinosaur doomed to extinction. Neither a long-standing reputation nor an excellent track record will help if these elements are not reflected online across multiple channels.
Today, approximately 243 million Indians spend a significant part of their lives online, with the advent of e-papers, news portals, social media platforms, blogs, etc; hence, the manner in which information is disseminated has changed both in terms of direction and speed. Platforms like Facebook and Twitter may have started off as mere social networking media, but today the power they wield in the world of business is beyond dispute. Companies across all the domains are investing massively into making their presence felt on various social media platforms. It is literally a battle to stay relevant in a world that does not acknowledge the existence of anything anymore if it cannot be found online.
5. Staying ahead of Real Estate portals
The proliferation of these portals certainly spells good news for end-users, because it gives them a detailed oversight of what the market is offering than ever before. However, it is a different story for individual developers. The uniquely democratic business model on which property portals thrive hinges on showcasing as many projects and properties as possible. While developers can (and do) pay for a higher ranking within this avalanche of options, the scope for focused branding and project-specific marketing on these projects is very limited.
Today, forging a distinct and prominent online identity is a very essential long-term function for developers; but more importantly, an effective online strategy plays a critical role in the success of a specific project launch. In the contemporary market scenario, developers who lack a well-defined online marketing strategy invariably find their projects selling at a far slower rate than their competitors.
Hirav Shah concludes by saying, “The sooner we realize what works for us, the better our growth can be.
You need to STRATEGIZE. You need the TIMING to be right.
You need ASTROLOGY on your side!
A one-on-one discussion and advice from Astro Strategist Hirav Shah will enlighten you about the aspects that are specific to your project.
“A well-guided move will not only make success easier but also CERTAIN…!”