India’s real estate industry should not follow Bollywood and instead welcome the outsider

The suicide of actor Sushant Singh Rajput has forced social media to unleash war on the Bollywood elite. No one knows the exact reason for the suicide but it is undeniable that industry insiders view outsiders with a mixture of insecurity and scorn. It will be naïve to view this as an inflection moment for introspection and change within the industry. Bollywood is easily the best managed cartel in India.

The real estate sector shares a few peculiar traits to the movie industry. Low credibility, weak planning and shoddy execution have been the hallmark of the two industries. However, these are only symptoms of a much larger problem for both the industries. That problem is the inability or resistance to attract quality talent or adopt a superior set of practices. It’s not as if there is a shortage of players in the housing industry.

One of the real estate associations alone boasts of over 20,000 members. There is near unanimity in the view that most of them will not survive the next five years. COVID-19 will probably accelerate that trend.

No one will complain. A substantial chunk of the developers are only part-time builders who will return back to their original core business or are the ones who only specialize in ‘optimal utilization of regulations’.

The real problem

The problem however in real estate is not the outflow of uncommitted players. That’s necessary as most were beneficiaries of an environment that had low barrier to entry and even lower accountability. The real problem is the lack of inflow of committed players. Only an outflow of uncommitted and weak players will eventually leave a small niche dominating the market. Evidence so far suggests that many players in this small club display an arrogance that is as bad as the sort one witnessed when real estate was a wild beast.

The premise for their arrogance in front of the customer is broadly this interpretation: “I will surely complete the project unlike most others whom you can’t trust. For that solid guarantee – I will charge you 25-30 percent more than every other project.” If the quality isn’t up to the mark for the steep premium one has paid – it is well, the problem of the buyer. This attitude is not limited only to buyers. It’s even to the stock market community. I am repulsed by the practice of a leading listed player who often refuses to name their joint venture partner – while announcing a joint venture to the exchanges. It’s a shame that the regulator and the stock market community has permitted this to continue for so long.

Here’s the challenge that has existed in attracting talent and players for the industry: premium talent has largely considered the real estate business as intellectually inferior or professionally exasperating. Besides, most of them previously perceived it as an industry dominated by unscrupulous entrepreneurs.

That has had consequences for the lack of innovation and upgradation in the industry as old hands still lead the way. Their historical success has convinced them that their way of doing business is the only right way of doing it. When challenged in a debate, their argument often ends with “real estate is very different from every other business.”

On highlighting global comparisons within real estate, the retort then diffuses to “Indian real estate is very different from real estate elsewhere.”

Some hard truths

The sector has often lamented, with some justification that it has improved amidst the disruption over the past five years.  Yet it must be pointed out that all of it has been imposed by external factors like RERA, GST, demonetization etc. There has been minimal disruption that has been brought by an insider who is challenging the existing framework of doing business.

Unfortunately, it’s not as if the younger generation in the industry is a beacon of light. Based on my interactions the thought process of most of them appears almost stuck in a time-warp — with few exceptions. That leaves an industry where a majority of the players lack the imagination or boldness and the dominant minority don’t care.

Yet housing is an industry that should never be written off even if today it is on a weak structural footing. In this framework — the light can come from outsiders. And here is the most important difference between real estate and Bollywood that spells optimism for the future of the construction industry. Bollywood can block outsiders and shun them because it remains lucrative even without them. The cinema quality may be poor, performances may be mediocre and scripts may be stolen – it yet works commercially. The real estate business does not anymore. It will now need to attract new talent to revive the industry from the quagmire it finds itself in. It will need true disruptors who can change the landscape of the real estate business – be it in cutting construction cost and time as we move to an era where ready products are preferred, marketing strategies that revolve around story-telling of projects, innovative designs and structures etc. All of this is likely to need the support of the ecosystem.

When that will happen is impossible to forecast but the conditions are ripe. Sushant Singh Rajput battled a hostile industry in Bollywood. His real estate equivalent should not face the same challenge. 

When not busy with his newstoon platform Snapnews, Vishal Bhargava is a real estate enthusiast who views and reviews new projects. Views expressed here are personal.