Four Advantages of Real Estate Ownership

The following key factors are commonly accepted as the major reasons real estate continues to be a good investment. For the majority of real estate participants, these factors are the most critical issues in a real estate venture.

1.) Real Estate is a Necessity: Real estate is at the very core of human existence. We all have three important basic needs: food, clothing and shelter. Our world continues to expand as more and more people are being born every day. In addition, there continues to be larger migrations of people from rural areas to more populated locations. Therefore, people will always have the need for temporary lodging, permanent shelter and places to conduct business.

2.) Hedge Against Inflation: Inflation is the invisible force eating away at the purchasing power of our dollars. A dollar, however, doesn’t buy today what it once used to. It is also evident that the quality of goods our dollars purchase is also diminished. For instance, the McDonald’s “Big Mac” has become progressively smaller year after year. Plus, when we purchase a box of our favorite breakfast cereal, the bag inside the box is practically half empty.

From the tenant’s perspective, rent seems to go up constantly and anyone on a fixed income may find it difficult to keep up with the cost of living increases. The owner of the property also feels the effects of inflation in the form of increased property related expenses, taxes, utilities and maintenance costs. As property costs rise, owners typically pass these costs on to their tenants in the form of increased rents and fees. Furthermore as inflation increases so do property values; owners will often benefit from the property appreciation.

3.) Production of Income: The most attractive and lucrative reason for owning real estate is in its ability to produce passive income for the property owner. Rent is accruing daily while payments made by the tenants pay down debt balances and produce predictable profits. Once the property is free and clear, the portion of income that was once used to service the debt payments now goes into the owner’s pocket.

4.) Appreciation in Value: Due to inflation, property appreciates in value. Usually, this statement is generally true. While there are no guarantees, if care is taken with regards to timing of the acquisition and trends in the overall marketplace, real estate tends to perform well when inflationary conditions are flat with some moderate expansion.

Luxury Real Estate Marketing: Is Customer Service a Luxury?

“The greatest danger for a luxury firm is to lose its status as a differentiated, premium brand, but wealthy consumer perceptions suggest that luxury overall may be in danger of losing its cachet,” said Milton Pedraza, CEO of the Luxury Institute. “This calls for a renewal of efforts to be unique and exclusive and to execute well on customer service.

The most frequently cited qualities that define luxury-superior quality (76%), craftsmanship (65%), and customer service (57%) – are the areas where wealthy consumers are finding the greatest dissatisfaction. More than half (56%) say that craftsmanship of luxury products is on the wane; 51% say that quality is decreasing; 50% notice a slippage in customer service quality and 48% say that luxury products are losing their design value.”

How does this apply to luxury real estate marketing? Real estate as a profession is a service business, real estate agents and brokers are service professionals. As we interview agents across the country for our series 50 Top Luxury Markets in the USA, we find that those who respond immediately to our queries are thriving in their marketplaces and those who want to eclipse the market leaders. They are easy to access, willing to share their insights, passionate about their marketplace, return calls and emails promptly and are a delight to talk to. One of the top market leaders recently interviewed said that you have to be nice to everybody regardless who they are or what their status in life. He returns everyone’s calls personally. As a result his client lists grows and referrals are plentiful.

Many of the agents we interviewed who are market leaders did not have websites, do not engage in social media, and do not know or care what SEO means or being #1 on Google. They are differentiating themselves on service, manners and excellent communication skills. They knock on doors; they meet people day in and day out. They are relationship oriented. They network face to face. They practice the fundamentals of business. They water plants for their sellers when they are out town. They send handwritten notes, birthday cards, and take their clients out to lunch. Tech is not the priority focus in their success equation and in many cases has been relegated to the back burner.

Luxury by definition implies rarity and exclusivity. Given the results from the Luxury Institute, it is evident that customer service is a key indicator in choosing a brand/service professional. People will remember you for your luxurious service. In our practice as branding and marketing strategists, we feel that customer service should take priority, and technology should facilitate customer service.

Urbanization Vs Real Estate Sustainability in India

Though India has a massive population, its rate of urbanisation has been relatively low. This is a matter of some concern, considering that India has three of the 20 biggest cities in the world, that is, Mumbai, Calcutta and Delhi. It also has 23 cities that house populations of above one million each.

Going by established and ongoing patterns, it can be safely said that true urbanisation has been limited to India’s western and southern parts. However, the process of urbanisation in these parts is limited to certain cities. This is a situation of considerable gravity all by itself; however, the larger issue lies in the gross imbalance between rural and urban development.

It is becoming increasingly evident that agricultural growth is no longer the answer for our rural economy, since India’s average yield per hectare is much lower than that of countries like China.

Not surprisingly, there has been a steady exodus from India’s rural parts to its urban areas, putting a huge strain on the infrastructure of the latter. This is most apparent in a city like Mumbai. Other metros across India are also buckling under the pressure of steady inward migration from rural areas.

RAPID URBANISATION

Rapid urbanisation is fast compromising the urban real estate marketplace. There are real concerns now about what the scenario will be a few years down the line. Gradually it is being realised that urbanisation must go hand in hand with environmental sustainability measures.

To illustrate, in India, as in many other countries, the growth in municipal waste is proportionate to its economic growth rate. Further, by 2020, India’s demand for commercial energy will very probably increase by a factor of 2.5. India is a chronically energy-deficient country, and already faces significant challenges with meeting its energy needs.

Rapid urbanisation is definitely not helping in this respect. We see the consequences everywhere in the form of power shortages and supply interruptions. This growing gap between energy demand and supply sends a clear SOS regarding the need to increase dependence on stable, more environment-friendly energy alternatives such as solar power.

A SECTOR DIVIDED

Currently, the Indian real-estate sector is divided into players who take the importance of sustainability seriously, and those who do not. The second group, which is in the majority, has issues with overall profitability, since rendering land and buildings sustainable costs money.

However, the overarching issue has more to do with ‘change resistance’. The laws of change resistance underline the difficulty in persuading people, corporations and nations to adopt proper sustainability practices.

A sustainability focus in the process of urbanisation calls for a change in individual values at the personal, corporate and collective levels. The problem is not that of ignorance – most are aware about the need for environmental sustainability, and even agree with it. The problem lies in the adoption and implementation of these values.

SUSTAINABLE BUILDINGS

At its very root, sustainability is a process or state that can be maintained at a given level for prolonged periods. In the real-estate context, it means developing land and buildings in such a manner that the environment can sustain future growth.

While talking of a sustained and sustainable real estate boom in India, one should remember that there is no market without a marketplace.

Therefore, for companies that deal in real estate in any capacity, environmental sustainability is not too distant from business sustainability. In other words, there is no difference between sustaining the environment and maintaining the marketplace for indefinite business activity.

Sustainable buildings are defined as buildings that are designed, built and operated with low environmental, social and economic impact while enhancing the health, welfare and quality of life of the people that live and work in them.

With international awareness of corporate responsibility having grown, sustainability has become a crucial factor in the assessment of the impact of real estate. Organisations, especially MNCs, are taking an increasing interest in the environmental credentials of the real estate that they occupy.

Although the demand for higher levels of compliance may initially appear like a threat to owners of large assets, sustainable buildings do not represent a loss in building utility or level of profit. Rather, modern sustainable technologies possess proven ability to raise environmental efficiencies while simultaneously bringing real economic gains. However, to reap these benefits, sustainable development requires a change in mindset.

IMPLEMENTATION

The process of making commercial buildings more sustainable is akin therefore to embarking on a journey. There are no quick fix solutions to be applied. Rather, owners and occupiers of buildings must work together to establish goals, undertake audits, and establish where savings and improvements can be made.

However, the foundation of achieving sustainable outcomes is the adoption of sound design and management principles. Performance enhancements can be achieved by focusing first on high-impact, low-cost solutions that can be implemented within a realistic time frame.

Once the appropriate solutions are identified and a business case is established for various improvements, the process of physical works, education and internal communication can begin.

The effectiveness of these measures then needs to be tracked, and the results of improvement fed back to the owners and occupiers of the building, and to any other parties involved, including contractors and design teams. From there, further improvement can be made with outcome goals being redefined as information and analysis of the improvement measures build up over time.

What is clear is that you not only need time to implement it, but also that it is not a process with a start and a finish. Rather, it is an ongoing process of improvement, feedback and further enhancement.

In developed nations, there has been a steady increase in the development of sustainable buildings. It is our belief that it is only a matter of time before this market preference towards sustainable buildings in developed markets begins to manifest itself more convincingly in India, as well.

MAJOR NATIONAL RATING SYSTEMS IN INDIA

LEED India by IGBC – Indian Green Building Council and USGBC (US green building council). There are currently 604 buildings registered under LEED India, while another 97 are LEED India certified.

GRIHA – Green Rating for Integrated Habitat Assessment, developed jointly with TERI (The Energy Research Institute) and the Ministry of New and Renewable Energy, Government of India. GRIHA has now got a national rating. Government buildings and PSUs would be the first to adopt this new ranking system.