Understanding home buyers in the VUCA world a big challenge for developers
October 1, 2020 12:34 PM
It is very important for the developer and the home buyers to be on the same page about the needs and wants of the future.
It is not only important for the developers but also for their investors and financers to understand the future in a manner that optimizes their risks.
The unprecedented scale of crisis in recent times is best described through VUCA – Volatile, Uncertain, Complex. Be it Health, Safety, Employment, Economy or Social issues, there is uncertainty and all of them are interconnected, making the situation even more complex. Experts have their own views about the post-pandemic world. Whether People will prefer to own a house or the city needs more rental housing; Whether people would prefer distant locations or stay close to the place of work: who will work from home and who will not – all these are questions to which there are no definite answers.
VUCA is the biggest challenge for developers today. Because if they start with a strategy and if it does not work, then they will have little options to deal with the steel and iron which would be poured by then. Real estate is a very localised business. What works in Bangalore may not hold good for Mumbai or in NCR for that matter. Every micro market in every city has distinct characteristics by way of demography, employment patterns and socio-cultural practices. Houses are built for the future. Therefore, it is very important for the developer and the home buyers to be on the same page about the needs and wants of the future.
Even the most seasoned and experienced developer of a market today might have a dilemma about how the product for the future would look like. Hence there is a need to have a structured approach to engage with the prospective home seekers. The top developers of the country – the likes of Godrej Properties, Mahindra Group, TRIL etc. – have been doing this for a long time. Typically, these are known as “Need gap”, “Pain Point”, “Future Aspiration” analysis. These are carried out by the “product team” of the respective groups sometime with the help of Leading International property consultants like Colliers, etc.
The results are there to speak for itself. While professional organisations like Godrej Properties have replicated their success almost everywhere in the country, many of the large local groups from NCR, MMR, Chennai and Kolkata have reached to the cusp of bankruptcy. The techniques of customer engagements and feedbacks reveals very micro level inputs. For example, the demography and occupation patterns at Hinjewadi requires specific considerations in planning and designing of the product keeping in mind the Young IT customer base which is markedly different than in the design considerations of Faridabad.
In some cases, there are in-house technical teams with the large real estate groups who have the required understanding of various nuances across different micro markets. However, the problems are more for the smaller players, particularly if they try to venture out in a new market even in the same city. In todays’ context buyers are more educated and well informed. They have very strong preferences and choices for everything. Further, the new age lifestyle includes many gadgets which were very rarely used even five years back.
Likewise, certain things are discontinued as lifestyle requirement. To illustrate, more dishwasher and wide body refrigerators are now very much part of lifestyle of a segment of demography which was only considered as luxury some years back. Similarly, the reliance of app-based transportation systems by the millennials has caused some rethinking about the future needs of carparking spaces in a building which is dominated by younger generations. Thus, it is always wise under for the developers, under the present situation of uncertainties and complexities, to receive and analyse feedbacks from the prospective consumer in advance so that right steps can be taken at right time.
It is not only important for the developers but also for their investors and financers to understand the future in a manner that optimizes their risks. The sector which is witnessing all time high level of unsold inventory, cashflow crisis and plummeting demand in many categories of products can’t afford to repeat the mistakes of the past. Listening from the home buyers and to make their houses future-ready will be the way forward.
(By Subhankar Mitra, Managing Director, Advisory Services at Colliers International India)