In the past few years, real estate as an asset class is transforming quickly. Major real estate players are building and investing in the sector on an epic scale. Moreover, the landscape is becoming more sophisticated and widespread, with a varied range of risks, returns and innovations being the new drivers of value.
For instance, the demand for private capital for real estate investment has increased manifolds during the past decade. In the emerging economies, the sector is witnessing a great migration to the cities, where the growing population and middle class are the drivers behind a desperate need for more urban real estate.
On the other hand, the cities are growing too, although not so rapidly. Here, the new value drivers are demographics, environmental issues, and real estate innovation. To give you a glimpse of what future possibilities lie ahead for the real estate sector, here are a few insights from some of the industry’s best minds. Take a look.
“The new regulatory framework will bring more order to the sector” – HN Vijaya Raghava Reddy, National President, Builders Association of India (BAI)
The regulatory framework implemented under RERA is expected to bring more order to the industry. Subsequently, real estate developers who depended on market capitalization and the consumers will have to change their ways.
For example, being a small or big player will no longer matter. What would matter; however, is how streamlined and transparent their business workflow and operations are. Therefore, it is only the players who are organized and have proper project development & estimation plans, real-time monitoring tools, project financial management, material procurement systems and adhere to compliance, who can thrive now.
Going forward, real estate companies will have to reduce their dependency on market liquidity and cash-based transactions. Instead, these companies will have to streamline their process workflow, especially in terms of cost planning and estimation, invoicing and billing, procurement and sourcing, tendering and material management. They will have to provide complete transparency to their customers on project execution and cash flows.
Transparency, Clear Accountability, and Effective Auditing can help avoid construction project cost overruns – one of the Big 5
In India, real estate companies are running behind schedule in terms of construction project delivery due to the following factors:
- Inadequate planning and inaccurate estimations
- Ambiguous contract terms and lack of cost control incentives
- Ineffective project oversight, governance, and management
- Availability of skilled labor
- Non-transparency in the procurement process
- Delayed payment and Imposed cash constraints
- Inexperienced management team
- Insufficient communications and sluggish decision making
- Absence of real-time monitoring tools
Due to the factors mentioned above, real estate construction projects often veer far off track. However, they can be corrected if both the real estate companies, contractors and other stakeholders work collaboratively by implementing successful workflow automation platform.
As part of an efficient plan of action, real estate companies need to invest in a comprehensive ERP software for real estate & construction, for monitoring and managing the project from inception to closeout.
These technology-driven business solutions can help mitigate schedule delays and cost overruns while improving critical governance and control processes including:
- Standardization of processes
- Transparency of controls
- Accountability of responsibilities
- Information audit trail
An effective risk management process is also essential to ensure timely project delivery. It enables real estate companies to monitor risks and identify when they need to implement a mitigation plan in place.
“ The real estate industry will undergo a consolidation phase on account of RERA and other factors.” – Ashish Puravankara, MD Puravankara
2018 had been the year of revival for the real estate sector in India. Not only was there was an improvement in the housing sales, the but the major realty players too, got serious on the completion of projects, after the implementation of the subsidies under RERA and PMAY.
Moreover, transparency and accountability in the real estate sector improved to a great extent with the implementation of the Real Estate Regulatory Act (RERA).
In 2018 and now 2019, there have been some remarkable trends in the real estate sector including Affordable Housing as well as mid- segment and luxurious home spaces. By capitalizing on Affordable Housing and Credit Linked Subsidy Scheme (CLSS), real estate companies are now able to access loans at more affordable rates.
That said, the companies also need to be compliant and adhere to the project completion deadlines set by the RERA. To do this, realty majors are leveraging technology to develop process capabilities such as effective budgeting and estimation, automated tendering and procurement, real-time project monitoring tools, etc.
Real Estate market in India Needs Workflow Automation
According to a market study conducted by McKinsey, real estate projects may take up to 20% more time to finish than their scheduled completion and experience budget increments by up to 80 %.
Therefore, the real estate and construction sector not only has to adopt process and technology innovations but also take steps to fix the basics. Project planning, for instance, remains mainly uncoordinated because real estate companies prefer working on paper.
Similarly, contracts often fail to include incentives for risk sharing and innovation while procurements are still unsophisticated. Therefore, the real estate industry needs to embrace new digital technologies such as ERP software for real estate and construction to achieve long-term benefits. Without workflow automation or process management tools, real estate companies would face a hard time meeting the increasing consumer demands, adhering to stricter compliance requirements and remaining profitable.