During FY-2015, the value added by the housing sector to GDP is estimated to have reached INR 3170 Bn and during the period FY 2011-15, the sector’s CAGR growth is pegged around CAGR 6.5%. Although the real estate witnessed a spurt in growth in FY 2010 on account of economic recovery post the global economic slowdown in 2008-09, increased cost of borrowing and overall sluggishness in the India economy between FY 2011-14 affected growth in the sector. However, there have been signs of growth in 2015-16 with the market estimated to have grown by ~10% owing to slight increase in demand and a cut in interest rates.
Top 6 metro cities (Mumbai, Delhi/NCR, Bengaluru, Pune, Chennai and Hyderabad) account for almost 55% of existing households in India. A slowdown in fresh unit launches in these 6 cities over the last few years signified a slowdown in demand. This is primarily due to higher interest rates, low growth in income and ever-growing real-estate prices. A major reason for launches being delayed is the issue of unsold inventory from previous years due to lack of demand thus creating a situation where supply is exceeding demand.
However, the situation is not as gloomy owing to focus on ‘housing for all’ by the government and a further fall in interest rates going forward which is expected to revive the housing sector in medium to long term. Further, increased regulation is now preventing organizations from bending any rules adding to their challenge of differentiating products and services along with managing the costs smartly. The challenge for real estate organizations in this scenario of uncertainty will be to look at market trends influencing their business and identify and build on opportunities to stay ahead of the curve.
The perspective of trends
Imagine that the first cell phone has just been released and people are excited but at the same time confused by the idea of carrying a phone outside of their homes. Few have cell phones and some are uncertain that they will become popular. Fast forward 25 years and the streets are dominated by cell phones with smartphones taking over in another 3-5 years.
This change in the communication market is an excellent example of a trend. A trend is anything that alters the market your company operates in. In order to keep your company ahead of the competition, it is important to utilize trend analysis, or the process of evaluating changes to your market.
Trend analysis looks at how your industry started in the market, how it has grown, and where it is expected to go. For example, how cell phones first come about, how their popularity changed, and how manufacturers and retailers expect the market to change. In short, we can identify opportunities when looking at several of these trends together. Now the questions arises how does one find relevant trends?
Imagine another scenario of retail. What if your internet enabled-refrigerator at home could automatically place an order with your grocery store of your most commonly used items? The financial transaction is processed by your telecom provider. The goods are delivered directly to your doorstep via a drone within 30 minutes of placing the order. This scenario may not be very difficult to imagine with advances in technology but the missing link is ability to identify several trends be it Technology, Market or even customer insights that is resulting in identifying the right opportunity.
Let us now re-consider the same scenario but this time we look at the trends shaping this scenario. Some sample trends are shown in the adjoining graphic. This level of understanding can provide us a much better way of identifying what best possible opportunities exist further enabling us to list all possible innovative solutions. So how can we use this knowledge to identify trends and build opportunities for any industry/scenario?
Opportunity identification through trend identification
There are several databases available that describe over 150 trends like above. These trends have been identified by looking at several industries and the unique characteristics that define their evolution over a period of time. A simple first step here will to understand these trends and identify ones’ that are relevant for our company and industry. Typically, these would not be more than 20 to 25 which can further be looked at by constructing a trend relevance map.
A sample trend relevance map is shown above for our real estate scenario where the trends like Digital Culture, Environment, etc. are the mega trends and the ones’ interconnecting them like Screen Culture, Generation Z are macro trends. This map tries to affinitize relevant trends and further creates linkages between the same to provide a much richer and deeper understanding of the interplay between trends.
As a next step, some of the trends from above can be used to develop scenarios of the future and identify opportunities for innovation. We can also look at some ideas that have already been generated and experimented with (these are called as Trend Inspirations) that further help us to build opportunities.
This way of looking at trends and being able to find opportunities for innovation can prove immensely advantageous for organizations to stay ahead and create new products and services more in tune with the market. This knowledge is certain to help organizations build a robust strategy for the future. It is safe to say that technology is beginning to get at the real estate industry the way it got at commerce and media and travel and transportation. With all of the information available coupled with some understanding of trends as described above, the next few years are sure to be exciting and full of growth in the real estate sector. Stay tuned!