New challanges to real estate project management

Real Estate - Challenges of Project Management with

Maharera, DCR 2034 and, stakeholder dynamics

MAHARERA will be completing one year of confusion and, DCR 2034 four years. We need to exercise project management techniques by adapting deviations in standard practice. Business alignment to project management techniques is now well set approach. Stakeholders in real estate business premise, government, neighborhood, developers, customer and consultants have or are updating their approach very fast. This is posing difficult times for project management professionals to align standard practices as they need adjustments every now and then. Good management does not guarantee that there will be no problems but, it ensures that one is prepared to handle them better.

1.       Stakeholder analysis:

Talking about developers who are promoters of project and major risk takers, are now fast changing the ways they made money or, made the money work. Projects are either higher capitalized now or, are collaborative. Reducing the front loading of projects at the cost of sharing profits now work better in lower, middle and higher middle income group projects. Redevelopment projects have mass management skill, higher capital as well as collaboration requirements. You must have experienced Collaborating with landlords, marketing consultants and executing agencies at various levels.

·         Collaboration is desirable but one finds it difficult to achieve as, sharing liability of delivery comes with the package.

·         You will succeed in collaborative development if interests are resolved and, shareholder management is taken care of.

2.       Planning – Financial & marketing

Planning had never been so dynamic, desirous and serious before. Yet, one needs to understand difference between estimate and forecasts. You must have had time/ cost estimate and, sales forecast. Also one needs to understand different types of estimates, their limitations and use. One need to understand that estimate, does not guarantee anything but, better management decision making. It is heartening to see that planning has taken an approach for closure by completion. i.e. delivery and handover from the previous payment milestones or, cost approach. Your funds flow has become more stressed under the escrow and limitation/ certification regime. Certification and, release have become successor of payment from customer. This is giving importance to “delivery” approach. Time, cost and Project risks differentiation is thinning. Hence risk impact has become more sensitive and demands response to be specific.

·         Plan for release of funds rather than receipt. Estimate and calculation of working capital demand needs to be acceptable as well as sufficient.

·         Plan what you are confident. Not what can tweak numbers. Integrating sales forecast, funds flow and, construction management.

·         Plan risk management for completion with responsibility matrix focused.

3.       Contract Document

Today becoming more responsible and for a long period for defect liability, it is obvious to transfer responsibilities proportionately to all the people who are making business in the process. Right from developer company, to vendors and executing agencies to consultants. All need to share the responsibility of Promised delivery. It’s no more one year defect liability, its five years and, Good Delivery. It’s not far off when consumers shall be approaching different regulatory or judiciary for Quality deficiency also. Hence, contract document has to specify “Quality acceptance criteria” for customer contract as well as material supplier and execution agency contract.

·         Sharing responsibility makes you better link to get collaborated with. Accept it.

·         Quality is unwritten condition of timely and as promised Delivery. Write it.

4.       Delivery – Product, governance

Someone asked me when to book profit in a real estate project. Apart from an accountant or tax consultants view point; I feel when the delivery is accepted in completion and closure of sale agreement. Till then, receipts should be treated as advance, i.e. liability. More or less, one need to understand this in its essence and spirit that, business is complete when delivery of promised and, compensation of the same has taken place. Phased projects have a new focus emerging – governance and maintenance. Governance is the activity for which a promoter has to carefully draft and observe policies suitable for the customer segment, product and life style that is promoted by the project amenities. The subject requires in-depth study of the customer segment culture, post purchase behavior and, life style change related issues.

·         Long term maintenance – Select material, executing agency/partner carefully.

·         Governance – Develop social entrepreneurship if in redevelopment or phased project.

Project management of Phased projects is exposed to such new challenges that are yet to be streamlined for standardized practices.

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Is being green unaffordable?

I remember being on the dais of a conference. Real estate – affordable housing. The topic of group discussion was – whether affordable housing should be Green. Sharing dais were one of the eminent architect, director of a research company and couple of reputed developers.

I was mooting that what is not Green, is not Affordable. Everyone was disagreeing with me to different degrees. May be I was not able to put my argument convincingly or, clearly. Now, five years since then, one of the developer approached me and asked, can we make a project water, energy and waste disposal self-sufficient through design for one of his large affordable housing project as, the project location did not have public services in vicinity.

When one thinks about product design in real estate, he seldom thinks about target customer. The sluggish market has shown them what is missing in product mix and design. Using the buzz word “affordable housing” rampant but, idea of sustainable development was hard to sell as developers were successful in selling by adding up free bees or, amenities. Now, it really becomes a point of discussion – what are amenities that are valued for customer segment that are not able to afford a house and hence, want affordable housing. Developers must see that the project should be affordable to the extent that for customers/ users the cost of acquisition becomes more or less cost of ownership. At least for the period during which the customer repaying loans. There is no point in making homes that can be bought but in the process, buyer loses all his future income and hence, can’t spend to maintain it. That is also more reason to make homes that not only requires less maintenance but also demands less travel time and common maintenance expense. One should ideally target no or low living & maintenance expenditure for 15-20 years. This is possible only and only if the development is Green.

However, for LIG & EWS the case may be not same and require acquisition cost to be lowest may be at the cost of no - maintenance life as low as 5 years.

People were hovering around with numbers in millions as demand, but not much effort has been taken to serve this segment. Issues that demoralize such efforts are - Low mark ups, CRM is different than usually practiced in tier I/ tier II that caters to MIG & HIG, Tier III have small volumes demand per project, Lacking focused designs, construction technology and sourcing of material.

Procurement has to be part of planning activity so as to minimize waste and optimize construction cost. It is necessary that things are well planned in advance as such project’s costs are very time and quality sensitive. This segment will always have demand and attractive for revenue flows. The question is – proportionately largest habitat has to be sustainable and Green or, can we make only 25% development environmental friendly and hope to achieve environmental sustainability. I think answer is very simple – can not leave that 80% behind.

Urban infrastructure, of which housing is an important part of, must consider factors like  – living expenditure & quality, connectivity time & cost, loading to public services & neighborhood and, discharge to environment. These needs to be planned & designed not only for acquisition but for long term use being high capex activities. Hence it compulsorily has to be Green.

customer & profits - smart cities...smart way

Continuing my last post - transitional development. The operations model is in finalization. Just one question confused me at this point - Is buyer of a property my profit point in transitional development?

Frankly, this question came from one of my client who spun my mind when he said "Shailendra, I do not want my REAL profit from people who buy in my township." Although, he meant to make a buck from collecting dividends, I still got stuck with the question when I am sitting to finalize my operational model.

One - I plan seriously to make this kind of development my goal, Two - I truly believe why a property buyer in such a development be shelling out more than 'just affordable' profits. 

Actually, a transitional development is through enrichment of the buyer or user of the developed facilities/ infrastructure. What can be seen as profits is dividend from second level ventures. The efforts put in to create facilities/ infrastructure is a capital cost of the transitional business. To make business viable, we need to create surplus income from these facility development. Hence it is correct to collect the profits 'just affordable' at all levels of development. Now, this is actually smart. Through governance you create a development that is growing communities who generate commerce. And that too, at all cost recovered. This means you have a business platform ready without any money held up.

Smart City connection to this model is very simple - this is Smart. Having all the functions carrying out smart ways, technology diffusion, automation etc. etc. I really don't think this is a smart city. I not describing Sensible at all. Smart has to be sustainable. Smart has to Give technology and not Take. Smart has to live happily and not only Conveniently. Smart is using resources more productively. Smart city need not attract people, it needs to Generate Smart People. 

No Smart City can exist without generating smart people through - education, entrepreneurial support, commerce center, business support infrastructure, vocational training centers and, platforms that makes entrepreneurs to grow and support others to grow. I believe only such smart cities can be worth developing.

All the profit making could be gyrating around this activity and, dividends of new business ventures could be the profits. Facilitation is more appropriate word. Developer has the population that are more potent customer of his whom he can facilitate and ensure a dividend out of it. This can be called 'development ke saath bhi, development ke baad bhi'. Sorry, could not resist picking up that line from somewhere.

Transformational Development - Sensible Real Estate

Transformational Development is a concept that connects real estate development to the realistic community development bringing about transformation in existing living/ working/ playing at tier II and tier III cities/ taluk places to become at par with global standards and, sensible, through a business model. This ensures business to be sustainable and scalable moving from major product to major service provider realtor that is located at places where economic growth potential is expected to be exponential. It makes sense as it aims at larger community need satisfaction and based on ‘Need’ rather than cajoling ‘wants’, enhancing consumption.

What Is Smart Growth?

Growth means growing in a way that enhances our communities and our daily lives, now and in the future.

Smart Growth is sensible, planned efficient growth that integrates economic development and job creation with community quality of life by preserving and enhancing the built and natural environment.

Road map

Every community has different characteristics, needs, objectives and opportunities. As a result, one community’s Smart Growth Vision and implementation plans are likely to be quite different from other communities whether it is a city, a suburb or a rural town or village. Still, each community can work toward a better future by considering whether a proposed project will contribute to a more economically efficient, attractive, user-friendly community. Hence, the Core function to identify opportunity of business is essentially sociological in nature and, research oriented in processes. Getting connected to needs of the community day to day, one can be sure to have better acceptable product design as well as early entry to customer perception space and enhancing credibility.

Business and its scalability

Over 650 district places and over 5500 taluks presents potential of over 300 such potential locations for this development. Most of these 300 taluks are business friendly and, full of enthusiastic youth that otherwise have to migrate. Over 40X growth in metros indicate a huge migration whereas the taluks have all the natural resources and, basic infrastructure ready to be used. These are places where people wish to grow and, business needs locations where people wish to grow and not, survive.

THE CONCEPT IS CONVERTED IN A BUSINESS PLAN BY CREATING NEED BASED GRAVITY CENTRES IN TIER III AND TIER II FOR TRANSFORMATION, ECONOMICALLY SELF SUSTAINABLE, AS A CONGLOMERATION OF DIFFERENT STAKEHOLDERS AND, DEVELOPING SMART HOUSES AND, SMART COMMERCIALS/ RETAILS AS A REAL ESTATE ENDEVOUR. THE CUSTOMERS OF REAL ESTATE TAKE DIRECT BENEFIT OF TRANSFORMATIONAL ACTIVITIES AND BECOME THE FIRST COMMUNITY TO SUCH GROWTH PLAN.

These community centers are flocked by residential, commercial and industrial real estate development of a size that is consumable within 12 months in those areas. Preferably downsizing front loading of the project by joining hands with property/ land owners in series of small ventures, made attractive options by these gravity centers or, existing social infrastructure. Normally such properties shall be 25000 - 100000square feet to be developed in one to three phases. Reduced front loading and small construction cycles to deliver project (9 – 12 months) makes IRR attractive with lower risk. Scalability can be anybody’s guess from the facts of size of the market. Multi locational operations, design and, community management are looked upon as Key issues for success in this program

SHAILENDRA MALIWAR

09833821166

Changing Faces

Mumbai Realty organizations have a new face in last decade or so. The focus has shifted from maximizing FSI use through all the Manageable Means to all the Manageable Skills. Not that manageable means have ceased to exist but, they have certainly taken a second row. Credit is not solely to ex-commissioner and CM, it also is to - 1. Prices, 2. highrise trends (during last decade the definition of highrise is not limited to 10-20 floors, it is 50 and above), 3. Technology (not limited to type of shuttering, but also extending to walls, windows, floors, etc.), 4. Organization Structure/ human capital deployment.

When the customer changes, an industry changes. All the above factors depend on each other in some manner. The township/ multiple building layouts/ mixed use layouts have entered wherever they find land required. Marketing is more and more becoming realistic and, realizing increased knowledge of customers in product and finance. Risk is no more limited to permissions. Technology, quality and customer service has gained considerable weight. It is no more a common man business in Mumbai.

Operations obviously has to aligned with larger business picture than just worrying about procedures. It seeps in policies and strategies. Dealing with young heads and, Change management. practically continuously. This leads to a situation that needs more maturity, creativity and, empathy to lead the group and achieve business objectives. Styles and, knowledge have to form a blend that sinks rightly with the premise in totality. Engineering talent is in more demand than what it was a decade ago. Thanks to high rises and, mass housing requiring high control of cost and quality. This also requires relevant change in higher management. 

Project Management at last, has earned respect in real estate. Board is acknowledging difference between Construction Management and Project Management. However, project managers need to be aware of aligning the objectives with business objective and, not distance themselves from the business activities. I would rather blur the line between project management scope and, operations management for real estate at more than one node. Continuous learning and, flexible principles is the key today.

World Environment Day

Yesterday at a mall. One asked me to write a message on Environment Day. I might win a prize for the best message. I wrote one. Wondered if I really care for it though. Tried to oversee what are those initiatives that I practice (other than writing a blog, sms or mass mail). Found it very hard to list. I have not stopped taking projects that are not green or, are not executed and designed keeping environment in view. I always thought that efforts, however small make a difference and should be appreciated but, I have never been able to convince myself on this. People who are learned, people who understand, people who could contribute ... basic list includes engineers, architects, developers, equipment manufacturers, factory owners etc. etc.. I find myself responsible in the front of the Que. Otherwise also is it not that I take a step forward first and then start advising others? or start preaching altogether? This is so strange that I find engineers with all the lessons behind them to know what are the precautions to save environment are and, how to go about them. India has such millions of professionals and yet, they have to be given a message. This indicates that theory X still is valid and, education is bookish. Confucius said - It takes courage to know what is wrong and, yet do it. I think we are courageous. I have taken my step towards the cause, hope everyone has. We really need to worry about our offspring more than seriously. I am eager to join hands with professionals who would form a community with this norm and, while impressing upon others to take steps for the cause, will commit to practice green policies only. Let us pay back.

A perspective to Real estate

It just crossed my mind that everybody wants to talk about common man but never want to be one. Whomever I have met are nurturing some or other ambitions. Rather, some just expand on what they have achieved. Always there has been a confusion about a common man - income parameter, lifestyle parameter or, just a majority attitude? I feel pity on myself that I always drift from established standards as, I believe no standards are there to remain for ever.

Taking the relevance to community settlements and 'affordability' again, people conveniently overlook the 'ambitions' of common man and only understand the 'need'. It is seldom seen that a settlement has 'future' flexibility planned ahead of time that will become 'need' of the community therein.

There are incidents when realtors have ignored cross - segment development and, created something that is not 'sustainable' for the community to be. It would be so much good to the emerging development trends in India that we all remember the 'needs of development' along with the  profits, and take such capital extensive ventures in a nation building perspective. Actually that is what it is going to be next decade, what we are planning now.