The many challenges in residential real estate
In the early 2000s, a general euphoria gripped the nation, especially the youth, with bright new opportunities that lay before them. Real estate dreams that came true were a big part of that vertigo.
Rapid urbanization led companies to set up their offices and development centers on subways, which in turn attracted talent from across the country. This has resulted in strong capital appreciation in residential real estate, with everyone investing more and more in this sector. However, euphoria is inevitably followed by darkness.
The scale of this growth has increased over the past five years – demonization, RERA, GST, and now COVID-19 have all been big shocks that have changed the residential real estate landscape significantly.
Due to the unused, unsold inventory and the ongoing projects that are in various phases, the Indian residential real estate sector is threatened with a financial emergency worth around 150 billion US dollars. According to a report by Knight and Frank, India’s residential real estate market is valued at $ 13.5 billion while the shared residential real estate market is valued at $ 6.5 billion.
However, massive challenges such as a mismatch between supply and demand, subdued demand and a liquidity crisis have stalled growth. The pandemic has also exacerbated and exacerbated the challenges facing residential real estate. This will result in a 46 percent decrease in new housing developments in urban India.
In addition, significant residential inefficiency is causing great stress for all parties including investors, developers and homeowners. This needs to be addressed on a war basis for the good of the housing market and the economy as a whole.
The good news is there newer solutions and business models That will go a long way towards overcoming these challenges.
Apply a service layer to the residential property
The current rental returns on residential property are only one to three percent, which makes them unattractive from an investment perspective. In the past, residential real estate capital appreciation has been high enough for owners and investors to ignore rental returns, but not in the present circumstances and for the foreseeable future.
Plus, managing properties and rentals has never been easy. While it is relatively easy to buy a property, The real devil is in the aftermarket. in terms of managing the asset and rents to generate returns from it and then servicing EMIs.
Post-purchase expenses for maintaining the property can be between 10 and 20 percent of rental income, which is the Focus on the rental return again.
The solution is professional rental and property management companies, which are a relatively new paradigm in India. These companies will play a very important role in driving this change in the future.
It’s no longer just about the asset. The real value of this will unfold when the customer service wrapper, aimed at both renters and owners, is added to the residential property. The most important factor for the service wrapper is technology – to ensure efficiency and consistency in the implementation of the business process.
In addition, nearly 90 percent of residential property in the United States and Europe is managed by real estate and rental companies, while in India it is less than 10 percent.
Technology development and acceptance in residential real estate
Technology is at the heart of all business processes related to residential real estate and rental management. It also ensures that owners, tenants and service providers use it efficiently to communicate, provide services and conduct transactions.
And it has gone through various stages of progress.
Marketplaces to discover and find houses
Over the years several developers have created marketplaces with details of ongoing and completed projects and related content to enable online sales. However, their biggest challenge was monetizing this technology with advertising revenue.
With Google and Facebook, however, faster search results were available in real time with laser-guided ad solutions. Second, these marketplaces were unable to validate the quality and accuracy of the data.
Real estate management marketplaces for house management
Home-centric property management services platforms have created marketplaces for homeowners to provide their maintenance services to. Currently, these platforms are facing major challenges from local actors including plumbers, carpenters, etc. who are just a phone call away from the owner’s apartments. Of course, these marketplaces did not provide the owners with any information about their property conditions, etc. – an unaddressed space that was left behind.
Community management platforms: apartment complex management and facility management
Due to the poor performance of several charities (RWAs), several community management platforms were created to facilitate service by controlling real estate processes relating to visitor access management, the maintenance of common rooms, the communication of apartment complexes, etc. created a strong ecosystem for the smooth operation of apartment complexes.
What was missing here was that Interest of a single homeowner, who not only wanted to be aligned with the processes and activities of the company, but also wanted a professional rental and management solution, higher rental yields and a continuous cash flow.
Rise of Prop Tech rental and property management platforms
For customers, the need of the hour is a customer-centric platform that focuses on individual tenants and owners and improves the rental and living experience. For real estate and rental companies, leveraging technology is essential if they want to scale their business.
These rental and property management proptech companies work seamlessly to bond tenants and owners using a modern asset management process based on data analysis, artificial intelligence and machine learning.
The orientation of the platform towards the joy of tenants has led to the digitization of the end-to-end rental and property management processes. The entire life cycle of tenants, assets, and owners, as well as the accounting and financial process, need to be automated.
The platform brings both owners and tenants together under one roof to extract information from each other’s actions. Right now, tenants are excited to use technology to discover properties, sign digital contracts, and pay rent online. You also want to avoid messing with the owners. For real estate investors in multiple cities who do not physically live on the property, they prefer tenant digital management.
In addition to a robust ERP for rental and property management, several use cases use AI and ML, which offer the crucial differentiation, such as
Identify demand hotspots – This includes identifying micro-markets and the right price points at which demand is high depending on work, life and play parameters.
Assessment of assets based on the service requests – Good assets have higher loyalty and offer higher rental returns. Based on data, it is easy to predict the expected rental return on the asset.
Categorize assets – Data points can be used to evaluate the tenant type model that can be used to increase rental returns on the assets.
Predict outcomes – Based on consumer behavior and based on patterns and activities on social media, service providers can predict the stability of a tenant.
The future of residential real estate is no longer just about the asset. The real value of the asset will unfold when you apply a technology-driven customer service wrapper that focuses on both the tenant and the residential property.
Without a doubt, technology will be one of the biggest differentiators in the residential real estate sector. On the one hand, Proptech solutions are still expected to solve all business processes related to rental and property management. However, winners will go a step further by leveraging SaaS, AI and ML to drive efficient business outcomes.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)