Nirupa Shankar – Executive Director at Brigade Enterprises Ltd and Brigade REAP
The Real Estate sector in India is ripe for technological disruption as it is heavily dependent on unskilled labour for construction. The Construction industry spends less than 1% on technology, one of the lowest percentages across all industries. Construction labour productivity has not kept pace with overall economic productivity. Even on a global level large projects take 20% longer to finish scheduled and 80% of the projects overshoot budget. These figures are ratified by McKinsey and Company in a 2016 report on Disruptive Technology Trends.
One regulatory disruption in the Real Estate space has been the introduction of the Real Estate Regulatory Act (RERA) – which has impacted operations and business viability for many developers across the nation. While the act is consumer friendly, requiring developers to deliver projects on time and provide quality products, the act also places onerous restrictions on developers. For instance, the act severely limits the fungibility of monies raised from a particular project and has harsh penalties for delays even if the reason for delay is beyond the control of the developer. This creates more reason for developers to adopt technologies that can help them in the following:
- Plan better / enhance operational efficiency
- Control costs
- Save time
- Deliver quality, snag free apartments
- Increase customer satisfaction
However, despite all the issues waiting to be resolved, adoption of technology is fairly limited. The reasons for this are many. While developers are looking for solutions to help them be RERA compliant, it is found that there is a lack in:
Plug and Play Solutions:
Many of the start-ups with solutions focussed on the real estate space require a lot of tweaking to their current business model in order to fit in to a developer’s existing systems and processes. Since 80% of the industry is unorganised, the start-ups need to work with the few developers who are professionally run, using established ERP solutions or those who are ready for tech adoption. Developers also keep in mind the cost-benefit of spending time to tweak and implement a solution by a start-up as opposed to working with more established technologies and solutions.
Most of the existing services offered are “nice to have” services that a developer is not keen to pay for. Unless a service or product can show concrete savings in time or money, or directly attributable increase in revenue, a developer will not want to pay a monthly or annual fee for it. He will ask for a success based fee which will require a clearly defined outcome.
Every company has a trajectory for growth. Just like how medium-sized companies struggle to make the quantum leap from mid-scale to large scale, many young companies struggle to make the leap from start-up to small-scale. At every stage, companies go through growing pains and the need to scale up is a constant pressure for founders. It is often found that a developer gives a proof of concept (POC) opportunity to start up to “try out” their service.
The startup might do a good job with the limited scope. However, when the same startup is asked to implement the service across all the developers projects, it will struggle to keep up timelines, quality and cost due to recruitment challenges of finding quality talent, retaining quality talent or the ability to create processes that work seamlessly or lack of back-end support and tech to scale up exponentially. This creates lack of confidence in a start up’s ability to handle large quantum of work.
Every company has problems. It’s just that different companies have different types of problems depending on which stage they are in. However, the focus of creating a sustainable company is one that can scale up while being profitable or at least see profitability at the end of the tunnel.
This is to ensure when developers put their faith in a start-up, work with do not suddenly come to a standstill or the start-up does not suddenly wind up and close shop one day due to lack of funds or a founder quitting. It impacts the developer’s ability to service his/her customers thereby impacting reputation.
Bottom Up Buy – In:
Lastly, buy-in from the developer’s team is essential for technology adoption. Unless there is buy-in from the people who are required to implement the solution or adopt the product, progress will be slow. Adoption of technology does not happen top down.
The staff down the ranks will find a reason for why something does not work unless they have “buy-in” of the product/service and that means clearly knowing “what’s in it for them” or having clear visibility on the benefits of the product or service.
If these roadblocks can be addressed by young companies wanting to disrupt the real estate industry, there is nothing to stop them. The industry is their oyster.