Real Estate Sales

Real Estate Cost Escalation Affecting Project Quality

The Covid pandemic impacted the world in every imaginable aspect. The most significant of this impact was the standstill that it brought to the global economy, which in turn affected all commercial businesses.

India too felt the sharp pinch of the pandemic in its economic activities, and underwent 2 years of instability in all commercial sectors. The real estate industry was also among the other business activities which were affected. However, the Indian real estate industry proved itself to be highly resilient to such turbulent times and it restabilized in the wake of the pandemic.

Cost Escalation in Real Estate

The disruption of the global supply chain that occurred earlier this year began a cycle of turbulence and volatility in manufacturing costs, which posed a new challenge for real estate. Another downside of this has been the cartelization and arbitrary prices levied by manufacturers, because they are aware of the high demand that is there in the market. These factors are working in alliance with one another to escalate building material costs.

The Impact of Cost Escalation on Developers

As per reports, building material costs for commodities such as cement, steel, tiles etc. have witnessed a year-on-year escalation of approximately 35%. This raw material price increase has caused the cost of construction to rise by approximately Rs. 500 per square foot, as per gathered statistics.

Real estate businesses operate within a delicate network of their stakeholders, each of which are looking out for their personal interests. Developers construct projects which are in turn purchased by consumers, and hence they mutually benefit one other. If either side of this nexus is impacted, the entire system faces a threat.

The Conflict for Developers

The main source of profit for developers in the business stems from the financial surplus that they can generate through the sales of their projects versus the costs that they incur in constructing it. Construction is not the only cost that developers have to bear with respect to a project, since they also have to invest in marketing it well. Hence it is essential for developers to maintain a financially viable difference in their construction costs and selling costs in order to stay afloat in the business. In the present scenario, the developers have been exposed to the stark reality of ever-increasing construction costs. They are now faced with a difficult choice, about whether they should expose their consumers too to these high prices, or bear the costs themselves.

Can Cost Escalation affect Project Quality?

With respect to the first alternative, it is imperative that developers price their projects in accordance with the prevailing real estate price trends. Consumers are demanding properties within certain price configurations, and if developers choose to exceed that, they will be faced with a dip in the demand and sale of their properties. Developers are hence avoiding passing on the excess costs onto their consumers, in an attempt to retain the present real estate sales velocity. This has affected their profits, especially in segments such as affordable housing which are designed and priced with low profit margins.

Understand Location and Target the Right Audience

The remaining alternative for developers then is to keep their project pricing the same, but decrease their own construction costs so as to keep up a profitable difference between the two. The only way for them to do this despite the raw material price increase is to compromise on the quality of their constructions. By altering the quality and quantity of raw materials that are used in a project, the construction costs can be altered in a way that even with the higher prices of commodities and the same prices for property, developers can earn the similar margin of profits.

Why Developers are not Compromising on Quality?

Altering project quality is not a realistic and preferable option for developers since their reputation in the market is directly linked with the quality of their construction. If the quality of projects is compromised, developers might be able to survive in the short-term, but it is not a sustainable pattern to follow. Besides this, there are also rules and regulations which developers have to abide by in terms of construction quality.

How can Developers Overcome the Cost Escalation

It is evident that in the interest of thriving in the real estate industry, developers can neither increase their project pricing nor can they deteriorate the quality. However, with the right project and pricing strategy, they may be able to overcome this cost escalation and maintain their profit margins. It is essential for developers to have a thorough understanding of the market trends, pricing trends, consumer demands and insights of various micro-markets so that they may be able to create and sell properties that are well-suited for the market demands, and earn revenue in the process.

Understand Location and Target the Right Audience

BeyondWalls- an integrated proptech ecosystem for real estate in India can help developers with accurate and data-driven planning and strategizing. It can provide end-to-end services for real estate marketing and sales.


Real Estate Industry Moving Towards Sustainability

The theme of “Only One Earth” that was adopted for the Environment Day 2022 is more than just a theme- it is an awakening, and a realization that needs to be in all our minds.

As we made long strides of development in all sectors, we lost sight of the fact that we are burdening the earth. Our reckless use of resources damaged the environment, and only now are we realizing the severity and repercussions of it.

Sustainability in Real Estate

The real estate industry in India is a crucial economic driver. It presently contributes 6-7% towards the national GDP, and is the second largest employment generating sector. One of the main reasons that it has attained such importance is the fast-accelerating growth of the industry, which unfortunately led to it contributing to environmental degradation. As per statistics, the industry has a contribution of 36% in total energy usage, and of 39% in process-related CO2 emissions.

The world as a whole has been made aware of the damaging consequences that can come from ignoring the need for environmental preservation, and mindsets are now changing towards attaining sustainability in all spheres. Since real estate is such an important sector in India, it has also become a part of this emerging movement. The pandemic further acted as a wake-up call for everyone, since people began realizing the need for a healthy-living environment. The trends of real estate have now shifted towards implementing ‘green building’, which is based on the conservative use of resources. A lot of top developers around the country are making their projects with more regard to its effects on the environment. The aim of this approach is to ensure that the least amount of negative impact is exercised on the environment due to real estate development.

To enable this idea of green building, there are certain parameters that are being adopted in real estate constructions:

1. Sustainable Construction and Project Designs

Project designing and construction are now being undertaken with an objective to minimize energy and electricity wastage. Smart facades are being designed which can be used to limit the energy consumption of properties, because they sense the external environmental conditions and adapt themselves according to it. There has even been a switch towards greener construction mechanisms, which are more sensitive towards the environment in terms of energy consumption, resource usage and disposal and emissions.

2. Improved Utilization of Available Resources

The real estate industry in India has improved the use of resources, both natural and man-made. With respect to natural resources like water and solar energy, systems are being devised to preserve and harness them better. The man-made resources of building materials are being reused and recycled to avoid their wastage, and materials which do not exert a direct negative impact on the environment are being preferred.

3. Effective Waste Management

Waste management and composting systems have become an increasingly common addition to most developments, since untreated waste is a big challenge to the ongoing green initiative.

4. Promoting EV Infrastructure

Another significant change towards sustainable construction has been made by promoting Electric Vehicle (EV) infrastructure. Vehicular emissions are among the biggest contributors to pollution, and developers are now making EV charging stations in their projects. This easy accessibility to charging stations will work towards increasing the use of such vehicles.

These changes have been instrumental in achieving sustainable real estate development, and are transforming the industry to make it more environmentally conscious.

Technologies and Systems that are Enabling Sustainable Real Estate

In its journey towards achieving sustainability, the industry has been facilitated by certain technologies and systems:

1. Building Information Modelling (BIM)

This is a process based on 3D modelling which is helpful in visualizing and analyzing the design and structure of a building. In terms of sustainable real estate development, BIM has been effectively used for various purposes:

  • Accurate Energy Modelling to reduce requirements, which will in turn lead to reduced costs
  • Daylighting analysis
  • Logistics and site management to reduce the carbon footprint
  • Informed predictions regarding the quantity of raw materials needed, which has reduced wastage.

2. HVAC systems

HVAC stands for Heating, Ventilation, and Air Conditioning. Real estate businesses are now adopting green HVAC systems, which use efficient and environment-friendly technologies to allow for the conservation of natural resources. Due to the energy efficiency attained through green HVAC systems, there has also been a reduction in utility bills.

How Consumer Sentiment has Influenced Sustainable Real Estate

The real estate market in India is shaped by the demands and preferences of consumers. Of late, there has been an increase in awareness regarding environment preservation. As more and more people are being exposed to the rising dangers of unsustainable practices, they have become more conscious in choosing such products and services that are sensitive to the environment. Consumers are now demanding properties that are constructed with a view to be energy and resource efficient, and they are also willing to pay premium amounts for such properties.

With the ever-changing market trends and consumer sentiments, it is essential for developers to remain apprised of the latest insights. BeyondWalls– an integrated PropTech ecosystem can help developers with this, by providing accurate market information, enabling them to plan their projects in accordance with this information, and eventually market and sell it effectively. It provides complete, end-to-end services for all real estate requirements.


How PropTech is Influencing Indian Luxury Real Estate

In the last two years, the world has been struggling to recover from the effects of the covid pandemic. It had brought all economic activities to a standstill, and real estate was among the other commercial industries that were struggling to recover. The sector faced a lot of ups and downs, mainly driven by the lack of stability in the economy. However, the industry has proven itself to be resilient and is slowly getting back to its former pace.

How is the Indian Real Estate Sector Presently?

Presently, one faction of real estate is proving to be thriving in comparison with others, and that faction is luxury real estate. As per reports, luxury property accounted for only 7% of the overall sales in Q1 of 2019, and have now increased to comprise 12% of the overall sales in Q1 2022. This change in consumer sentiment can be primarily linked to the feeling of security that people associate with their homes, and hence they are preferring bigger spaces.

There is growing understanding in the minds of developers regarding consumer demands. Properties are hence being tailor-made to satisfy all these demands. This understanding comes from the analysis and interpretation of scores of data pertaining to market trends and consumer behavior which is being enabled by PropTech.

PropTech- The Merging of Technology with Property

PropTech has greatly influenced the real estate sector, and is one of the biggest contributors to the revival of the luxury market. In simple terms, PropTech means the aspects of digitization and automation that have been merged with the real estate industry. This is helping in the streamlining of the industry, and also increasing its efficiency and transparency.

One of the biggest advantages of adopting PropTech solutions for the industry has been the big data that is easily generated, segregated and stored. The data covers a vast spectrum, ranging from market trends to consumer sentiment. This data is an extremely valuable resource for any real estate business, since it can offer direct insights on what homebuyers are demanding. The insights can be appropriately analyzed by developers, and used to align their projects with the ongoing trends and enhance their sales.

With respect to the luxury real estate sector, PropTech has achieved success due to the data-driven insights and market information that it generates.

Here are some of the key aspects that Proptech has revolutionized, leading to an improvement in the sales of the luxury market:

1. Location Analysis:

Real Estate Sales Trends 2022

Luxury properties cannot thrive in any and all areas. They have to be adequately matched by the surrounding neighborhood and amenities, and it is essential to identify a location where such properties will sell. The location has to be studied in association with the other consumer demands, because they operate hand-in-hand for the success or failure of projects. The Indian real estate industry is comprised of several potential micro-markets where there is demand for luxury projects, and the data gathered by PropTech solutions can help in such locational analysis.

2. Understanding Consumer Sentiment:

Digitization allows for large volumes of data pertaining to consumers to be easily collated. This data can give developers input regarding what type of properties consumers are preferring, the desired configuration, carpet area and amenities in the projects, and much more. This information is the foundation of building a good project, and it must be analyzed well. Due to the influence of PropTech, developers have been able to identify the niched audiences who demand luxury properties, and their project strategies have allowed them to satisfy all the requirements that consumers have.

3. Pricing Decisions:

The emergence of PropTech has led to precious data regarding pricing preferences of consumers to be stored and used for analysis. Pricing a project well is extremely crucial to attain real estate sales growth , and it becomes even more important for luxury projects. There are various aspects involved in pricing decisions, and they have to be made with a balance between offering a good price for consumers and gaining profits on the property. Developers can use the data gathered by Proptech solutions to smartly understand the pricing trends, and can then make informed pricing decisions.

4. Simplifying Purchases:

One of the biggest positive changes in the real estate sector that has emerged with PropTech has been the automation and simplification of the purchasing process. This has not only helped the luxury segment to enhance its sales, but has led to overall real estate sales growth. With the influence of PropTech, the standard sales and marketing have seen a shift towards real estate digital marketing and sales automation.

BeyondWalls- an Integrated PropTech ecosystem

BeyondWalls is an end-to-end partner for all real estate stakeholders. It is a tech-driven platform, and offers services that range from project and pricing strategies, go-to market strategies, as well as full funnel sales analytics. It makes the best use of PropTech solutions to make data-driven strategies that can allow developers to cater to the demands of consumers. Such informed decisions are crucial for the sales success of all real estate segments, and especially the luxury market.