The digital imperative for residential real estate in India
A new Bain & Company report suggests that now is a good time for India’s residential real estate sector to ramp up its digitalisation efforts, as things get increasingly challenging for the industry.
The global strategy consulting firm outlines how life has gone from bad to worse for residential real estate in India over the last few years, hit by a wave of regulatory changes. The Real Estate Regulatory Authority Act (RERA) 2016 made a sea of projects subject to regulatory approval, while the Goods and Services Tax (GST) introduced in 2017 put businesses into a flurry of tax compliance efforts.
Add to this the fact that consumer sentiment and the overall economic outlook in India was on a steady decline towards the end of last year, and the bigger picture is bleak. Obviously, Covid-19 and the resultant shutdown of the economy have certainly not helped the situation. However, Bain & Company’s experts suggest that the crisis could be a catalyst for India’s real estate sector to rearrange itself as an industry of the future.
Technology is key here. Digitalising has a twofold benefit for real estate developers. First, it allows them to tackle short term challenges posed by the crisis and all that comes with it, and second, it increases their overall operational efficiency to help tackle future challenges. The report's co-authors and Bain & Company partners Gopal Sarma and Parijat Jain put these benefits down clearly.
“The pandemic will breed a new host of customer key performance indicators (KPIs), namely around building safety and security. Developers that demonstrate thoughtfully redesigned infrastructure upgrades, such as touchless surfaces, digitally enabled entry and exit, resident and guest management systems, smart homes and smart club houses, will attract buyer attention and provide differentiated value,” said Sarma and Jain.
“Furthermore, as pipeline customers defer their visits, and traditional lead conversion techniques of walk-ins and in-person showflat tours lose traction, developers who spearhead adoption of digital sales channels including virtual tours and online customer bookings, will find themselves as the leaders of change,” they added.
Most developers will be looking to end up in such a position. The question remains of how to get there. The authors divided up a range of Industry 4.0 technologies based on the nature of impact they can have on real estate businesses.
Which technologies?
For instance, technologies that can significantly manage some of the immediate challenges mentioned above include the internet of things, digital engineering, generative design, digital project management tools and mobile engagement. Each of these can support the transition to a more consumer-centric real estate sector, while other technology such as big data, virtualisation and cyber security can act as a solid base for this change.
Tech such as 3D printing, additive manufacturing and advanced robotics also have endless potential in residential real estate, but Bain & Company suggests that there is some time before these come into play. In fact, most real estate developers are yet to take the first steps on their digitalisation journey.
According to the report, the digitalisation of a real estate business best unfolds in two waves. First is to digitalise operations, which involves going paperless, investing in enterprise resource planning (ERP) tools such as SAP, Oracle or Microsoft Dynamics, digitalising the project reporting process, and developing online portals.
Only then can businesses move on to the second wave, where Bain highlights how all the tools mentioned above can be applied in specific use cases. One such application is building information modeling (BIM), which “uses a standardised machine-readable information model to improve planning, design, construction, operation and maintenance of a facility such as a building or type of infrastructure.”
Building management systems (BMS), meanwhile, enable control over common areas of a building through smart entry and exit mechanisms and smart delivery systems. For developers, tech-based workflow management systems can enable collaboration among various stakeholders in the real estate ecosystem, while customer relationship management (CRM) tech can help build a strong client base.
These and more technologies can help bring India’s real estate sector back on track. The industry is of central importance to India’s economy, and needs to progress to remain relevant. “The industry and developers must begin to accelerate their digital transformation journey to improve process efficiencies, redefine the end-product and retool with an upgraded operating model for a new future,” concluded Sarma and Jain.
