Realty sector in the throes of ‘growing up’
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Its not just buy, build and sell business; construction industry has to develop core competencies like ‘matured’ industries
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Unlike more matured industry sectors like automobiles, fertilizers, oil and gas and IT, real estate industry is still an infant in its journey of organisational evolution. Unprecedented opportunities for growth came up in the last few years and a dynamic group of entrepreneurs made a beeline for the organic growth in this sector.
The success of such growth seeking strategies resulted in organisations which are bigger in size but lack many other dimensions of matured organisations.
The causes for such a situation can be many and chiefly amongst them are the unavoidable dependence on disorganised sector for all the inputs required by the construction activity and the focus on short term gains and profits. While the growth and opportunity made the companies grow into organisations, lot of organisational sense needs to be brought into this sector now.
The investors look for sustainability of the real estate organisations when making funds available.
Ability to construct and deliver was the key challenge and competence for the sector till now. Now real estate organisations need to develop more competencies to grow and prosper.
It would not have been required if the scale of business has remained small, limited and disaggregated. The texture of business is changing and evolution is inevitable.
Long gestation
Real estate projects have much longer gestation periods for recovery of investments. Size and complexity of projects is increasingly growing with passage of time. The range of uncertainties due to the dynamically complex business environment is much wider now and organisations in this sector need to be better managed to sustain the growth.
The explosive growth is bringing in new players every day and the competitive landscape is becoming crowded.
Frequent announcement of projects by different players in all major cities and towns indicates that competition is turning hot. Imbalance thus generated, in the supply and demand of the real estate affects the profitability of the whole industry. The real estate markets inherently are not only cyclic but also chaotic. The political uncertainties and consequential changes in regulation is another source of destabilising influence on the industry.
Short term outlook of business and profits have been driving the industry for a long time. The glory of building sustainable organisations and business in this sector are yet to catch the imagination of the dynamic entrepreneurs who drove the growth in the last decade. It is imperative that some of the old paradigms have to be revisited. New paradigms of sustainability and long term gains have to be examined.
Because of the long gestation periods and critical uncertainties in the business environment, risk assessment and mitigation become important paradigms.
Now the time has come for companies to look at how well they are organised to deliver value to customers It may be necessary to adopt some of the best practices from other matured industry segments and customise them for real estate organisation.
Stereotype activity
Construction activity has remained stereotyped for very long and there is huge resistance to change. It is no longer possible for one core competence of constructing and delivering to drive a real estate organisation of the future. The first step that the organisations must take is establishing the core competencies that their organisation would like to develop and be differentiated in the market.
Y. V. V. RAGHAVA
(COO -SEZ & Corporate Planning -Indu Projects)
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