The entire world is facing a crisis due to COVID-19. Social distancing and a nationwide lockdown had a major impact on business no matter how established they are. The Real Estate which is one of the largest employment providers have come to standstill position though recently government have allowed the Real Estate Sector to resume its activities under partial lockdown conditions to keep their financial wheels turning during the lockdown period due to less revenue generation and the general uncertainties. Every business is forced to have a re-look at how they manage and operate their business. The social distancing and partial curfews in many locations have restricted the movement of prospective customers as well as the sales people. The impact is great on Real Estate Developers whose business growth depends upon the cash flow they receive from their existing and prospective buyers. The ripple effect of this shutdown will have a key impact on India’s economy as the Real Estate Business is one of the major sectors to provide employment and contributes over 10 % of total GDP of the country. In this testing time, Real Estate Developers will have to adapt to a new set of rules and be mindful of the following aspects to alleviate risks and to survive the slowdown caused by the impact of COVID19
• Controlling Expenses Against The Revenue Status:
It is very important for a Real Estate Business to conduct a proper assessment of their fixed and variable expenses as well as the actual revenue. Management should revise its strategies to control expenses without having a negative effect on revenue. These strategies should be adopted even after the pandemic effect settles.
• Verifying The Business Model
Under this volatile situation, it is necessary to review the situation every week and verify if the business models adopted are the best fit, if not, look for a better business model and reassess where your business stands as per your assumptions concerning the revenue and cost. It is crucial at the present time to track current financial metrics and cash flow. The business needs to evaluate new sales, collections credit cycle and debt services.
• Plan Policies for the Next 3 Months or Longer Period
It is a very uncertain situation and difficult to predict how long this epidemic will last. Real Estate Developers should be prepared for all scenarios. Fresh expenditure on hiring, traditional marketing such as newspaper advertisements, hoardings and expenditure on travelling etc. experiencing instant halt, if the crisis continues for 9 months to a year, entrepreneurs will have to reconfigure their business strategy to reduce the variable expenses, renegotiate fixed expenses (rent, salaries, equipment lease payments, etc.), and focus only on the crucial essentials for survival. Under this pandemic situation, social media marketing needs to be focused and online communication modes are to be adopted. Some serious reconsideration\'s would be required if the effect of the pandemic continues for 18 months or beyond. Businesses will need to strategize, communicate, and act with compassion.
• Strategies for Securing Investments
Every Real Estate Developer is facing problem for raising funds for their ongoing projects in this difficult time. A Developer has to identify funding agencies that have enough capital to deploy for the coming years and they may not shy away from it.
There may be some dip in VC OR HNI funding in short-run but as per the previous experience, it has been seen that the market has bounced back after the end of the epidemic crisis. It may be advisable for the business to gain confidence in the existing financiers for additional funding.
It is however very important to let your Real Estate Business sail smoothly in these difficult times. We may require following a few tips to stay connected and afloat during the shutdown:
1. Maintain Transparency with Your Customers
Communicate with the customer to get their feedback and get hold of their problems. Customers shall empathies with the Developer facing the crisis as long as the communication is maintained transparently. Communicate with customers to understand their perception of the product/solution offered by you.
2. Maintain Healthy Relations with Contractors and Suppliers
It is quite natural that during the pandemic situation the cash flow gets affected due to shortage inflow of funds. However, it should be helpful to make your vendors, suppliers etc. make aware about the situation and wherever possible defer the payment and give sufficient notice for the same so that they can also be prepared and there is no bitterness in this already difficult time.
3. Human Resource-Related Decisions
In Real Estate Business layoff is not a foolproof solution as in each activity manpower is required, the primary option should be to cut the salaries of the higher paid exec/employees. But in certain cases the business may find a certain set of employees are redundant during the shutdown period and in such cases take a tough call, do it with compassion lookout for government directives and wherever required give extra compensation as severance benefit. But these steps should be taken at once and not in stages to keep employees morale high.
4. Keeping Team Morale High
During this crisis period, it is very important for all team leaders to remain connected with each and every member through conferencing tools like Zoom and Google Hangouts. It is very important to maintain high spirits within the team and understand the general mood within your remote workforce.
5. Communication to Stakeholders
The right form of communication is the essence of healthy relations with stakeholders, most important customers and employees. In this situation, the leadership quality has to excel. Even a negative message should be delivered with utmost empathy along with transparent reasons. In these difficult times, it is important to stand united and help one another in whatever way we can. Stay safe and stay healthy. It may be noted that some of the best strategic decisions are built on trying times.
KW Group's Anthem.