The Indian real estate developers for long have been struggling to carve a market differentiation and stand out as a brand with top of the mind recall. With striking similarities in the product, the marketing brochure, sales channel and every possible projection, it seems time is ripe for experimenting with what has been a tried and tested formula in other industries – disruptive innovation. Track2Realty wonders whether market disruption is the next big idea in property market.
Call it market disruption or the innovative disruption or just new marketing strategy but it seems this is the next big idea at a time when the market conditions are really challenging to get noticed. What really is disruptive innovation?
Wikipedia defines disruptive innovation as an innovation that creates a new market and value network and eventually disrupts an existing market and its value network, displacing established market leading firms, products and alliances.
The seeds of innovative disruption in the Indian real estate have been sown years back by the Bangalore-based developer Sobha Ltd that has consistently scaled up the consumer confidence index with its backward integration model.
Recently, the developer has launched Sobha Connect program that is unique and disruptive to an extent that the developer is knocking the housing societies that they built and delivered some 10-15 years back.
Innovative disruption has the potential to be market differentiator as the buyers are not interested in tried & tested formats
Today’s buyer expects the builder to make an offer than no one in the market can match
First movers to introduce market disruption have reaped the benefits as the buyers find such emerging practices more value for money
An offer to match
How many of the developers would be in a position to re-invest into delivered projects with no tangible ROI (Return on Investment) in sight? Of course, the intangible benefits are even greater with satisfied buyers acting as brand ambassadors and sending new referral clients to the developer. The developer nevertheless believes it would be difficult for others in the marketplace to emulate for the obvious reasons – investment and consumer backlash if the product does not meet the expected standards.
JC Sharma, MD & VC of Sobha Ltd maintains that in a real estate set up where most of the things are done in a traditional manner, the very fact that they are approaching it little differently, encouraging the workforce to think out of the box, enabling them to share their ideas and adopting it, if found good, gives a positive message.
“We are trying to better our processes, bring in more efficiencies, cut costs, improve quality – all these have become a part of the company DNA and we are committed to continue on this path,” says Sharma.
Similarly, another Bangalore-based developer Puravankara has brought innovative disruption in the market by offering the customers to purchase an apartment and then lease it back to them for a contracted term of 7 years. How many of the developers can replicate this commercial real estate model into the residential space?
Puravankara’s Managed Residences Plan is a three-way alliance between Puravankara, Snapdeal and JLL to provide unique leased asset management. This enables customers to purchase a ready-to-occupy apartment from Puravankara across Bangalore, Chennai, Coimbatore & Kochi and lease it back to Puravankara with an additional rental appreciation benefit of 8.0% every year.
Buyers, however, have an exclusive option for premature withdrawal from the lease agreement, in case they choose to occupy the apartment or manage the rental process themselves.
Ashish Puravankara, Managing Director, Puravankara Projects says the company is striving to meet the evolving needs of homebuyers, and the benefits offered under the Managed Residences Plan are in tandem with the Group’s vision.
“While developers in the past have offered rent assurances for one or two years, it is for the first time a developer has taken a seven year long term view on rentals. This indicates our bullish view on the long term real estate story in the country,” says Puravankara.
Matter of strategy
Godrej Properties could create a market disruption in the National Capital Region (NCR), at a time when the existing regional players were struggling to stay afloat. Mumbai-based company Godrej Properties sold villa units worth over INR 300 crore at its newly launched project, Crest, in Greater Noida in a single day.
The channel partners who were taken on board claim it has not been just the corporate brand value of the developer that could create a market disruption. According to them, the developer had an innovative strategy to incentivize the stakeholders. The open-door policy for the market with an unique ‘experience centre’ could bring to its table the buyers at a time when other developers were struggling to even get leads, forget converting into sales.
In Mumbai, Omkar Realtors and Developers is offering home loan at just 4% interest rate along with a static floor price rise in its project Ananta at Goregaon. The company has also introduced flexible payment plan with a booking amount of only INR 2 lakh.
Similarly, Supertech has also introduced ‘Rent Reimbursement Plan’ (RRP) where all bookings made during this offer will be entitled to a monthly reimbursement towards rental expenses.
The monthly reimbursement will be in place till the time of receiving possession of the booked property. This limited period offer also comes with the added security of price protection. If the value of the home falls before possession, Supertech promises to match the price and offer discounts accordingly.
Experience from the other industries suggests that not all innovations are disruptive, even if they are revolutionary in their own right. In other industries disruptive innovations tend to be produced by outsiders, rather than existing market-leading companies.
The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition).
However, in the business of Indian real estate the innovative disruption has been by the most of the leading brands in the business. It is all the more interesting in a business where the quest for market disruption had earlier been to expand exponentially into non-core areas. The result has been disastrous for most of those developers.
But it seems now a large universe of the second generation developers into the business have learnt the lessons out of the experiences of erstwhile leading players that went into oblivion. And hence, the new market innovations are more grounded and realistic. How far would it be the brand differentiator of the developer? Well, only the time will tell.