raheja developers - realty's big-brand theory.pdf

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Realty's big-brand theory Take a crowded market, depressed sales and high-involvement products, and the formula is self-evident. The days of commodity selling in real estate are over: Buyers are seeking credible, quality names. Consider that brands today account for 50 percent of total residential sales and the worm is only going to climb up Image: Vikas Khot Abhishek Lodha took over as managing director of Lodha Group from his father If you had met me three years ago, I was a completely different man. I would say I was extremely confident,” says Harresh Mehta, 56, founder of Rohan Lifescapes, a real estate company that deals with redevelopment in South Mumbai. At the time, his decision to build Trump Tower on Hughes Road in South Mumbai had made him newsworthy. The limelight didn’t shine for long, though. Due to a slow economy and numerous delays in getting government clearances, Mehta decided to opt out of the project. Eventually, Trump tied up with Lodha Group to set up the now under-construction Trump Tower at Lower Parel. Mehta’s diminished confidence is a reflection of the state of his industry. Like others five years ago, he had assumed the upward trajectory of the real estate business. He is among the many who have been proven wrong. Residential sales were at a three-year low in the second half of 2014 across six cities (Mumbai, Delhi-National Capital Region or NCR, Bengaluru, Pune, Chennai and Hyderabad) in India. New launches were down by 28 percent compared to the previous year. According to Knight Frank, a real estate consultancy, 2.34 lakh units

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Page 1: Raheja Developers - Realty's Big-Brand Theory.pdf

Realty's big-brand theory

Take a crowded market, depressed sales and high-involvement products, and the formula is self-evident. The

days of commodity selling in real estate are over: Buyers are seeking credible, quality names. Consider that

brands today account for 50 percent of total residential sales and the worm is only going to climb up

Image: Vikas Khot

Abhishek Lodha took over as managing director of Lodha Group from his father

If you had met me three years ago, I was a completely different man. I would say I was extremely confident,”

says Harresh Mehta, 56, founder of Rohan Lifescapes, a real estate company that deals with redevelopment in

South Mumbai. At the time, his decision to build Trump Tower on Hughes Road in South Mumbai had made

him newsworthy. The limelight didn’t shine for long, though. Due to a slow economy and numerous delays in

getting government clearances, Mehta decided to opt out of the project. Eventually, Trump tied up with Lodha

Group to set up the now under-construction Trump Tower at Lower Parel.

Mehta’s diminished confidence is a reflection of the state of his industry. Like others five years ago, he had

assumed the upward trajectory of the real estate business. He is among the many who have been proven wrong.

Residential sales were at a three-year low in the second half of 2014 across six cities (Mumbai, Delhi-National

Capital Region or NCR, Bengaluru, Pune, Chennai and Hyderabad) in India. New launches were down by 28

percent compared to the previous year. According to Knight Frank, a real estate consultancy, 2.34 lakh units

Page 2: Raheja Developers - Realty's Big-Brand Theory.pdf

were sold in 2014 compared to 2.84 lakh units in 2013. And, since December 2014, there has been a marginal

improvement but no fundamental change in the sales trend.

But there are those who have managed to buck the trend: Companies like Lodha Group, Prestige Estates, Godrej

Properties, Tata Housing and Mahindra Lifespaces. These are the players whose properties command a 20-30

percent premium over those in the surrounding area. Consider that over the last three years, the overall sales of

the industry went down by 20 percent annually. During the same period, Prestige Estates grew by 18 percent,

Godrej Properties by 40 percent and Mahindra Lifespaces by five percent. Lodha Group, which is not listed,

says it grew by 17 percent every year.

Apart from this growth in the time of gloom and doom, here’s another thing that they have in common: They

have become trusted brands.

What’s in a name—that’s one question no upscale buyer, particularly in Mumbai, clearly India’s trendsetting

hub in real estate, is asking anymore. For those who’ve not kept up with the evolving landscape over the last

decade, the answer is, quite simply, ‘a lot’. Brands today account for around 50 percent of the total sales in the

industry, based on data provided by listed companies. Also, most of these companies have not limited

themselves to the premium and luxury segments; they prefer to have a presence across the real estate market.

Quite clearly, long treated as a commodity by the sellers, property is increasingly getting the differentiation the

buyers deserve. This focus on the brand is now a ten-year-old story in Mumbai, and the last 4-5 years have seen

the trend spread beyond it, to cities like Bengaluru, Chennai, NCR and Pune.

While some players like Lodha and Oberoi Realty are pure real estate companies, the others (Godrej, Mahindra,

Tata) are established and respected corporate brands which have extended themselves to the real estate business.

Other real estate companies like Puravankara, Sobha Limited and Raheja Developers (belonging to Navin

Raheja from Delhi) are quickly following suit, especially in markets like NCR and Bengaluru, because

corporate brands appear to sell easily on the quality perception.

In some cases, the leadership of these ‘new-age’ real estate firms is also significant. Take the Lodha Group

which—with a turnover of Rs 7,519 crore, it is the second-biggest real estate company in the country—is

headed by Abhishek Lodha, and Godrej Properties, with a topline of Rs 1,179 crore, which is helmed by

Pirojsha Godrej. Both are in their mid-30s, workaholics and are trying to create a sustainable model that defies

traditional norms of the real estate business in the country. They understand the volatility in the market and take

comfort from the positioning of their brands. They may have inherited ready-made brands but they have also,

over the last five years, worked to make these brands the face of the real estate industry.

Yes, there’s a lot in a name. And here’s why.

“The market has suddenly turned. It has become a buyers’ market due to oversupply. This was not something

that we had ever seen. We had only seen buyers coming to our offices… we never needed to make that extra

pitch. A brochure was good enough. They came and purchased the flats that we built,” Mehta says with a touch

of nostalgia. Though more optimistic about the market now, he knows he too will have to spend on brand

creation. Because the industry can no longer survive on word-of-mouth publicity and local brokers.