Whether the general population chooses to believe it or not, the real estate sector of the country is in a slump like it has never been before. Sentiments among real estate stakeholders have worsened and the Index Q2 2019 states that the unsold inventory stands at 42 months. This slowdown can be attributed to various reasons ranging from Negative ROI to Unfavourable Loan-to-value Ratio and from high taxation to the notorious economic slowdown.
A few months back, the finance minister of the country went up on national media to conclude that the slowdown in the automobile sector is due to the behavioural changes of millennials. Even though this statement drew negative feedback from the netizens, it sparks a whole new conversation about one of the most important factors in any business- the consumer behaviour.
In the real estate sector, the shift in consumer behaviour is evident. Baby boomers and Generation X denizens who desired to own homes tend to already own them. Millennials are now the prime target clientele for buying homes. Simultaneously, the status perception of homeownership on which the industry was thriving on, has faded – especially with on-the-move millennials who prefer to rent homes in convenient locations in whatever city they happen to be. This proves to be a major contributor to the slowdown in the sector along with other culprits.
An industry that has been flourishing due to its indispensability is now crashing in front of a million witnesses. And if this isn’t the right time to act, nothing is. Major builders in the market are desperate for a new course of action that is innovative, creative and triggers a trend among this new target group that doesn’t seem to need their traditional product mix anymore. They are looking for something that could save the real estate industry from falling prey to redundancy.
This has brought forward a basic business principle that for a while, seemed to be lost between the books of traditional business firms.
“A product that doesn’t change with the customer, gets buried in time”
The customer behaviour has changed drastically and developer behaviour has to follow suit.
In the past, the three major parties in a real estate transaction were the developer, the investor and the tenant. But gone are those days of the past.
The current demand requires intervention and this intervention in real estate is done by the operator. The operator helps the developer to adapt to a product mix that is built-to-suit the current consumer behaviour and demand. And unlike the past, the investor doesn’t have to worry about the management of the asset this time. All he has to do is to buy and let it to the operator or as the situation demands, buy-to-let. For an investor, it is just like investing in stocks. All you have to do is make sure you put your eggs in a firm basket and let the market take care of the rest. The basket in this scenario is the operator.
Even though this model is a new concept to conservative investors, it is, in fact, the saviour of an ailing real estate market and a beginning of a new phase in the sector- Real estate 2.0