The property market in India is in a sorry state. There is a huge supply of unsold houses in varying degrees of completion. Demand has come to a near stand-still as buyers are taking a cautious stance, bitten by huge delays and rampant unscrupulous practices. Investors have fled the market as price appreciation has been elusive. The clamp down on cash transactions has further slowed interest and added to the woes of the industry, which is the second largest employer (after agriculture) in the country.
Despite its troubles, the sector continues to attract sizeable private equity investments — in 2016, investments increased 26 per cent year-on-year to a nine-year high of nearly ₹40,000 crore. Bulk of the investment was in the commercial segment, boosted by the expected growth in real estate investment trusts (REITs) — a ₹1.25-trillion opportunity projected over the years. The Indian real estate market is expected to touch $180 billion by 2020, as per India Brand Equity Foundation (IBEF).
Building a change
Residential and commercial properties are a large trillion-dollar asset class that find favour among investors globally as well as end-users. Solving basic issues such as lack of trust, delays and inefficiencies can help revive the housing sector, which contributes about six per cent of GDP.
Builders are aware of the large market potential in a growing economy. They are trying to find ways to trim the fat, move out of the smoke and mirror mode of operation and solve issues using technology.
Besides, there are new requirements such as complying with the Real Estate Regulatory Act (RERA). The big push to add affordable housing implies finding materials and methods to improve efficiency. And the new paradigm of Smart Cities entails new tools and processes. Environment consciousness further necessitates use of energy-efficient construction materials to reduce carbon footprint.
Foundation of technology
The property industry is looking at technological solutions to address these varied issues and revive its prospects. For example, it is making use of big data and analytics to understand market price and demand. This is used to price homes better and arrive at more accurate valuations of commercial properties. Drones are used to survey land and monitor construction progress. It is estimated that the construction industry globally will buy over 6 million drones by 2025.
The construction process is also increasingly using digital building blocks. Robots are used for repetitive work, such as brick-laying or painting. Augmented and virtual reality are used to design spaces, besides providing a virtual walk-through of the project to potential buyers. Blockchain — the technology behind crypto-currencies — is a great way to build smart contracts and provide transparency in property records. It is also cheaper and faster to do transactions with blockchain; it helps reduce the high costs typically involved in property buying or selling.
Monitoring the project status at the construction site and preventing leakage or loss of materials can be done using sensors and Internet of Things technology. Nanoscience can be tapped to create greener, safer and more economical materials.
Raising the roof
As an end user, you may not see the full impact until a few years later. But there are early indications of what the future of real estate will look like. For example, there is already growing adoption of online portals for property purchases or renting. Sites such as Housing.com, 99acres and Roof and Floor provide comprehensive data and comparison for the benefit of users.
There is disruption in the office property space too, with co-working spaces, such as Awfis and Wework, expanding aggressively. This requires other facility providers to offer better features and terms to tenants.
The endless hassles in managing a property — plumbing issues, painting, finding a tenant, paying taxes — will ease as better property and lease management services come up. RERA may compel agents to be better equipped to serve customers, leading to traction in tools that help brokers. Unbelievable as it may sound, the quality of real estate agents could well improve over the next few decades.
Many new ideas are being tried out as well. One such concept is fractional property ownership — multiple owners may own parts of a property and take a share of the rent/capital gains.
Some changes are at the back end but still benefit end users by way of cost savings. For instance, builders are using marketplaces such as mSupply and Supplified to buy their raw materials and better track the supply. Creative financing solutions are also being tried, to reduce cost of funds.
These solutions are getting good support from strong players in the ecosystem. For example, real estate consulting firm JLL has set up a technology venture to fund early-stage start-ups. Big name builders such as Brigade are helping the ecosystem with funds and an accelerator programme. Lodha group launched a ₹50-crore fund in January 2017 focused on realty and Smart City solutions. Institutions such as Indian Institute of Science, Bangalore are partnering with L&T Technology Services for nanoscience and engineering research. In July 2017, DivyaSree Developers invested ₹5 crore in REBEL Disruptive Building Tech, which is working on specialised pre-cast construction technology.
Not all set
Going digital has its challenges, however. For one, real estate is not like financial products or other purchases where there is full comfort in online-only models. While platforms help buyers find and compare projects, and virtual tours provide information, results from online sales, such as the Google’s Great Online Shopping Festival, are mixed.
Even the property portal segment is facing rough weather. There is consolidation in the segment with many acquisitions — a $100-million buyout of Commonfloor by Quikr; PropTiger’s acquisition of Proprates and 3DPhy, to name a few.
There is also a scarcity of data to do any analytics or derive meaningful insights. Opaque operations that inhibit price discovery and fake listings further frustrate users. Many builders are also small and may not have the intent and resource to adopt new methods.
Yet, the sector that is possibly the opposite of digital — brick and mortar — is slowly but surely moving to a click and swipe era.