Moving from an industrial past to a digital future is a challenge every sector is facing. Although the real estate sector is no exception, it is uncomfortably slow to adapt to the changing expectations.
Today’s market not only expect real estate developers to provide exceedingly high-quality living and commercial spaces, but it also expects them to follow legitimate and ethical processes.
Modern real estate developer is expected to be:
- Legally Compliant
- Punctual with deliveries
Currently available technologies for real estate (PropTech) in India are fairly capable of helping the developers meet these expectations.
A survey by KPMG showcased the widespread recognition of PropTech’s potential within the real estate industry. Right from t/he inception of a project to its final stage – integration of PropTech delivers value.
Let’s take a look at how technological integration into various stages of real estate development can save the day for stakeholders and developers.
Different Stages of Real Estate Development – Challenges and Solutions
The stages of real estate development inculcate the entire life-cycle of a real estate project. It is a highly complex process involving multiple steps and stages. Depending on the market (demography), some steps are taken earlier while some concurrently with others.
Strategic planning is essential to any real estate and construction project, mainly because it is risk-prone and highly capital-intensive. However, India has a different challenge because there is no standardized real estate development process. The selection of real estate development model, its steps and their sequence depend on their relative importance to the developer.
Hence to simplify the process and understand PropTech integration and beyond, we focus on the stages of real estate development and how technological intervention can be a solution for challenges in every stage.
Stage 1 – Land Acquisition and Analysis
Land acquisition and analysis is a three-step process. The first step is carried out by acquiring a piece of land that is attractive for investment. Customer profiling and competitor analysis are two other steps carried out in this stage.
Geological surprises are the biggest challenges in the first stage. Discrepancies between ground conditions and initial surveys are common. It leads to costly last-minute changes to the project design, delaying projects and increased expenditure.
Technology as a Solution
High-definition surveying is one of the solutions. Integrating high-definition photography such as photogrammetry will reduce geological surprises on the D-day. UAV (unmanned-aerial-vehicle) technology and 3D laser scanning improve accuracy to showcase ground reality.
Stage 2 – Project Planning & Budgeting
Project planning is the second stage of real estate development and has three steps viz. Site Planning, Design and Cost Budgeting.
Planning and budgeting are the most crucial of the steps in real estate projects. Industry studies prove that decisions made at the early project stages set the strategic framework for the project. Lack of data about the costs, material, risks, and equipment poses a great rift between assumptions and reality.
For a real estate developer in modern times, a project plan with too many assumptions can leave space for ad hoc decisions later, many of which will either lead to cost escalations, increased risk, or even delays in project deliveries.
PropTech as a Solution
Real Estate developers can make use of PropTech in the form of a cost estimation and budgeting software right from the planning stage to address these challenges.
An effective solution to this is using a cloud-based real estate & construction ERP (Enterprise Resource Planning) which will aid in precise planning, reduce operating costs, provide a 360 view of an ongoing project, eliminate redundancy and foster positive decision-making.
Stage 3 – Approval and Financing
The third stage of the real estate development process is marked by approval and financing. It involves three steps viz. government approval, private financing decision (equity) and bank financing negotiation (debt). Government approvals and funding are sought in this stage.
The real estate development sector in India faces many challenges in the approval stage. Approvals can range from anything between 30-40 depending on the type of real estate project. To top it, the approval process is lengthy and complex which leads to high gestation period. It eventually results in cost escalation of the project.
Technology as a Solution
At this stage technological adaption is needed with the government departments rather than the real estate developer. Approval process can be streamlined by introducing a single-window clearance mechanism backed by technology. It will help everyone in the system.
Stage 4 – Strategy and Positioning
Strategy and positioning is the most extensive stage of the development process. It has four steps including branding, pricing, discounted cash flow analysis, and marketing. Discounted cash flow analysis is at the top of the things that decides the rest of the steps to keep the interests of the stakeholder first.
Anything is a challenge if not done right. In the Indian market, marketing falls short because of wrong positioning, segmentation challenges, and analogous targeting.
Improper positioning can lead to piling up finished inventory, and losses due to huge sunk costs.
Technology as a Solution
Real estate developers and investors can use predictive analytics and business intelligence before investing in branding and marketing for the project. According to Deloitte, Most investors plan to use predictive analytics and business intelligence for CRE investment decisions.
Stage 5 – Disposition
The final stage is of disposition and involves two steps – Sales and Construction. On the final stage, sales precede construction because of the prolific demand in the Indian market.
The primary challenge in this stage lies in the construction step. Due to paperwork, and different vendors taking up different functions for the builder – construction is most prone to pilferage and reporting discrepancies. It leads to financial loss, ultimately hurting the profits of the investor and builder.
PropTech as a Solution
This challenge requires tech intervention for automating the entire workflow of a real estate project with an end to end specialized automation software.
- Automated Cost Plans – Create granular budget estimates across various budget heads from detailed area statements at various design stages of design evolution
- Smart BOQs – Create detailed smart BOQs on the platform in a very short amount of time using library of 13 million+ line items from the database or create your own.
- Material and Store Management –Create detailed plans for material procurement to improve planning and scheduling and ensure that enough inventory is available at the right time with material management.
- Invoicing and Progress Update – Manage invoices and daily progress to stay on top of key project performance indicators.
- Daily Reporting – Real-time and RERA compliant reporting capabilities of the platform allows you to keep track and monitor your projects effectively. Avoiding paper trails and using tech to generate real time status reports will give the developers better quality control over the planning and execution of project and material costs.
The Future of PropTech
The industry in India is at a complex crossroad when it comes to the stages of real estate development. Prolific demand leads to projects selling out even before the construction begins. It is especially true for developers who are well-known and have a positive history surrounding them.
However, the biggest challenge is the timely deliverability of the project – which in most cases suffers and ultimately hurts the reputation and profits for the developer.
Bringing back the consumers’ confidence and expectations of stakeholders is critical for the developers. Technology can precisely cut through the sluggish processes during all stages of project development.
Digitization of processes by using workflow automation software Brings standardization, efficiency and cost control. Adopting PropTech will give real estate developers more control over operations during all stages.
PropTech is a key driver and is paving the way towards increased efficiency. It is bringing dramatic changes to the real estate planning approach and is making it easier to monitor large portfolios in real time.