There was a popular game going around corporate boardrooms a few years back, a take-off on the popular Housie or Bingo. Instead of numbers, the grid was populated with management jargon. Words and phrases like ‘synergy’, ‘transformation’, ‘customer centricity’, ‘strategic fit’, ‘business model’ and ‘value capture’, and even purported actions like ‘touch-base’ and ‘step-back’.
A contemporary update to the game would no doubt include ‘blockchain’, ‘___tech’ (fill in the blank with the industry being discussed), ‘AI’ and ‘ML’. The game was well-meaning, calling out rampant misuse of these words and phrases. It provided levity to the water-cooler conversations later in the day.
Real estate marketing brochures in India have for many years peddled their own version of the same Bullshit Bingo. They are replete with superlatives, hyperbole and hollow adjectives. Each one promises ‘elevated’ living, ‘luxurious’ amenities, ‘thoughtful’ design and ‘refined’ lifestyle! Some even proffer the oxymoron of ‘affordable luxury’. Every one of those adjectives sounds alluring. But scratch beneath their superficiality and they leave the consumer none the wiser about the actual product. Are real estate marketers just being lazy in sticking to a proven template? Or are they deliberately obfuscating one of the most important purchase decisions made by families? In fact, the industry has failed to develop universally understood product attributes that lend themselves to objective evaluation and comparative analysis. It would be fair to expect that the new vocabulary will develop as a matter of course as the industry matures, just as it has in other high involvement categories like automotive and consumer electronics. In the interim, however, consumers would do well to ask sharper questions of real estate developers vying for their attention.
Location and neighbourhood. It has been said that only three things matter in real estate – location, location and location! Often the first in a hierarchy of decisions confronting the home buyer is which part of the city to consider. Some value familiarity, choosing to limit their search to a narrow zone around their current residence. Others are open to being uprooted to an emerging suburb or an aspirational neighbourhood that provides an opportunity to match their goals with their means. Irrespective, it is important to systematically map transportation networks, convenience retail (grocery, pharmacies, salons, banks and ATMs, and food & beverage and entertainment would be the salient ones), quality of schools and colleges if that is pertinent to the customer’s life stage, and primary and tertiary healthcare in the neighbourhood. For upcoming neighbourhoods, the evaluation is perforce more speculative. Even so, assurance of reliable utilities and infrastructures like power, water, sanitation and access roads are basic pre-requisites and should not be left to hope and prayer. Apartment size and layout. The Real Estate Regulation Act (RERA) has forced developers to come clean on the carpet area of their apartments, putting paid to the creative coinage of saleable area. Even so, apartments with similar carpet area might offer very different trade-offs to each customer. A young nuclear couple who regularly entertain friends might value more space in the living room at the expense of the bedrooms. Others might benefit from additional space for grown children. In smaller apartments usable wall space, and therefore cubic feet, is as important as square feet. It is important that customers think deeply about how they will use various spaces in their home and not fall victim to a one-size-fits-all approach. Architecture and Engineering. While customers have developed a deeper appreciation of apartment layouts, they are often unable to discern right away the value of competent master planning and architecture. Privacy, natural light and ventilation are designed goals and not accidental outcomes. There are other engineered elements of how apartment buildings perform that are impossible for lay customers to fathom until they have already moved into their new home and, for example, experience long wait times for elevators or excessively high or low pressure in their water lines. For now, they can only draw comfort from the reputation of the architects, consultants and developers. It would be advisable to visit their completed projects and talk to their occupants. Amenities and their true value. The aspect of residential real estate, especially in the larger metropolitan cities, that has been most prone to universalisation and hyperbole is the amenities program. With even moderate-sized developments boasting several dozen amenities, the customer feels like an overwhelmed child in a candy store. Given the constraints of space and budget, there is invariably some amount of tokenism and a liberal dose of poetic license on the part of the developers as they seek to keep up with the Joneses where amenities are concerned. Customers would do well to understand what each of the promised amenities actually means and whether they are indeed distinct and useful. Cost of occupancy. The ‘kitna deti hai’ (how much does it give?) adage immortalised for car purchases by Maruti Suzuki applies equally to housing. But this is unfortunately wholly overlooked. In the euphoria of buying a new home, customers don’t consider the full cost of long-term ownership and occupancy. In addition to the purchase value, there are recurring costs like utilities, property tax and maintenance, and usage costs like annual club fees or paid facilities, that taken together build up to a fair overhead. These deserve to be a meaningful part of the home evaluation. Residents in neighbouring buildings might end up paying vastly different utility charges depending on the source of water and the choice of the power distributor. There is no comparability across competing developments on recurring society operating costs. In their quest to deliver to tight construction budgets, developers sometimes use materials that age quickly and require frequent replacement. Customers must bear in mind that every rupee of extra monthly cost in perpetuity – on account of maintenance or utilities - is equivalent to over a hundred-and-fifty rupees per square foot of unforeseen capital cost! Pricing and mortgage. There is a crying need to simplify pricing in real estate. The common practice is to entice customers with low ‘sourcing’ prices and then stick on a whole host of other costs at the point of purchase. This plus-plus pricing approach leaves customers deeply distrustful with a much larger hole in their pocket than they envisaged. Mortgage pricing can be equally deceptive and unfortunately requires out-of-reach financial modelling skills to unravel.
For too long real estate consumers have been misled by slick marketing that papers over the actual product attributes. Given the value of the purchase and its long-term consequences, it is high time responsible developers and consumer bodies put some effort behind replacing the balderdash with more objective and measurable product parameters. Only then will customers be able to look beyond the smoke and mirrors of the illusionists to make informed choices.
Arvind Subramanian, the author, is Chief Executive of Mahindra Happinest, the affordable housing business of the Mahindra Group. Views are personal.