It will no longer just be about the asset. The real value of it will unfold when customer service wrapper, focussed on both tenant and owners, is added to the residential asset. And, the most critical enabler of the service wrapper is technology — to ensure efficiency and consistency in implementing the business process
In the early 2000s, a general euphoria engulfed the nation, especially the youth, induced by bright new opportunities lying ahead of them. Real estate dreams becoming a reality was a huge part of that giddiness. Rapid urbanisation led to companies setting up their offices and development centres in metros that, in turn, attracted talent from all over the country. This led to a steep capital appreciation of residential assets, making everyone invest more and more in this sector. However, euphoria is inevitably followed by gloom. The pall over this growth has been growing over the last five years — demonetisation, RERA, GST, and now COVID-19, have been big shocks that have significantly altered the residential real estate landscape. About $150 billion worth financial distress looms the Indian residential real estate sector due to the unused, unsold inventory, and ongoing projects stuck at various stages. According to a report by Knight and Frank, the Indian residential real estate rental market stands at $13.5 billion while the shared residential rental market is worth $6.5 billion. However, massive challenges like a mismatch in supply and demand, subdued demand, and liquidity crunch have brought growth to a standstill. The pandemic, too, has precipitated and compounded the challenges of the residential real estate space. It will lead to a dip of 46 percent in the launch of new residential projects in urban India. Moreover, a significant inefficiency in the residential real estate is also causing dire stress to all stakeholders, including investors, developers, and home-owners. This needs to be addressed on a war footing for the larger good of the residential real estate market, and the economy at-large. The good news is, there are newer solutions and business models that will go a long way in addressing these challenges
Applying a service layer on top of the residential asset
The current rental yields in residential real estate are as low as one to three percent, making it unattractive from an investment perspective. In the past, capital appreciation of the residential real estate was high enough for owners and investors to ignore rental yields, but not in the current circumstances and foreseeable future
Besides, managing properties and rentals has never been easy. While it is relatively easy to buy a property, the real devil lies in post buying, in terms of managing the asset and rentals to get returns out of the same, and subsequently servicing EMIs
The post-buy expenditure in maintaining the assets may stretch anywhere between 10 and 20 percent of the rental earnings, which has brought the focus back on rental yield
The solution comes in the form of professional rental and property management companies that are relatively a new paradigm in India. These companies will play a very critical role in the future in driving this transformation
Moreover in the US and Europe, almost 90 percent of residential properties are managed by property and rental management companies, accounting for as low as less than 10 percent in India
https://yourstory.com/2021/01/challenges-residential-real-estate-proptech
