By Akhil Saraf
We’re all excited about the sharp recovery real estate has been seeing post pandemic, but has real estate in India reached its former glory?
If we compare the 2021 real estate sales with that of 2013, we’ll see that the housing sales have dropped by 27% over the decade.
So what really brought this lull in the realty sector? Is this just an unfortunate set of circumstances because of wider challenges or is it time for us to recognise that housing needs to evolve fundamentally?
Let’s understand the macros first
In 2013, a record of 325k homes were sold, compared to 260k homes sold in 2021 in the top 7 cities. Between 2013 and 2019, India’s GDP went up from 1.85 Trillion USD to 2.87 Trillion USD, witnessing an expansion of 55%. During this period some other sectors have been completely reshaped with technology led companies.
Valuation of a few technology start-ups in the same period:
You get the gist.
Why is real estate not close to the former glory of being the largest wealth creator of India?
I know the comparison with tech might not be fair, but what I want to draw your attention to is not the eye-popping valuations, but what’s behind these numbers.
Everything else in a customer’s life has changed in the last decade
The customer journey has undergone a monumental shift over the last few years. Every single industry has the same formula – put the internet in everything.
This has led to value maximisation and large-scale shifts in consumption patterns. One could argue that even the underlying product has gotten better – think home shopping, restaurant options, or hailing cabs.
The valuation behind these tech start-ups may be questionable, but the impact on a customer’s life is quite obvious.
Real Estate missed the tech boom
While technology was booming in other sectors, the housing sector significantly witnessed a slowdown.
With real estate developers finding it hard to work on razor-thin margins and a slowing broader market, innovation became the first casualty of the slowdown in the industry.
Need for product improvement
People’s need to acquire new things is driven by FOMO (fear of missing out). When products fundamentally get better, people upgrade. It’s as simple as that.
Better cars, better phones, better everything really. At this point we need to ask ourselves, can we make housing that much better?
The problem with the homeowner journey in prop-tech so far
Most technology is built to enable buying everything faster. From the ‘buy now’ button on Amazon to 10-minute grocery delivery, everything is ultra-fast.
Home buying is a once-in-a-lifetime transaction, which is high-value, and has a long-delivery & decision-making period. Can technology for both of these really be the same?
Would you hire the same people to sell groceries vs real estate? Both have to be fundamentally different.
‘Customer aspiration – Builder servicing capability’ mismatch
Customers’ aspirations are at their peak when they’re buying homes and within no time, it turns into anxiety for the entire run-up to possession.
Meanwhile, builders are busy ensuring 200+ man-made components come together perfectly in a project to deliver on time!
In the fight between, a customer making an emotional purchase and the builder making a mechanical sale, the gap is too wide and customer satisfaction always takes a hit.
What’s coming up in the next decade?
As of today, only 45L people earn over 10L INR/year. In other words, only 45L people can afford to buy a home worth 50L+ INR in India.
Based on the World Inequality Database, the number is expected to grow 9x when India’s GDP grows to a 10 Trillion USD economy. This will unleash a new era of demand fuelled by a new aspirational class that’s urbanising.
These patterns are fundamentally common when countries transition from low income to medium income.
Some economists have even predicted real estate to grow to 1 Trillion USD in India by 2030.
What will the next version of housing look like?
We need to build homes that connect to the overall lifestyle of consumers.
An all-permeating asset class that defines what financial security means and builds lifestyle options to personalize living. Tech needs to bridge the gap between the aspiration of our customers and our ability to let them dream holistically. Young parents, senior citizens, investors, are all looking for one-stop solutions where their primary needs are met. And that’s exactly what we’re building at Reloy – the ability to personalize the idea of homes for every customer.
With our collective strength of 3% of India’s 100B USD housing market, already with us, we’ve taken on the mission of solving homeownership.