Service Real Estate

8/9/2019 Service Real Estate

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By

Dhaval Shah 49

Sohil Jewani 41

Murtuza Bhanpurawala 37

Aamir Ansari 36

Real Estate

To Prof. Jalpa

For Service Sector Marketing

(5.2)


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A C K N O W L E D G E M E N T

On the completion of this Project, I wish to great fully acknowledge,

by taking this opportunity to express my sincere gratitude to Prof. Jalpa

for giving me kind support and co-operation and her guidance and useful

suggestions that proved very useful in this Project. Once again thank all

the people who have directly or indirectly help in this Project.

Lastly, I sincerely thank all my friends who have always given their

encouraging support and been a great help all the time at various stage of

development of this Project.


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Index

Executive Summary 4

PEST Analysis of Construction Industry 5

7 Ps of marketing 8

Service encounter (RATER) 13

How banks arrive at eligibility of

home loan applicants? 16

Findings 17

Suggestions 18

Conclusion 19

Bibliography 20


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Executive Summary

India is blessed with one of the fastest growing real estate markets in the world. It is

not only attracting domestic real estate developers but also the foreign investors;

particularly, the NRI investments in India have a bulk of their share in the Indian housing

market. The housing construction industry is poised for double-digit growth in the backdrop

of large population base, rising income level and rapid urbanization in search of

employment. Moreover, the housing construction industry is expected to overtake other

industrial sectors in terms of contribution to G DP growth in the next few years.

Presently, the affordable housing, basically targeted at economically weaker class

and low income groups, constitutes the majority of the Indian housing industry, both terms

of value and volume. However, medium and luxury housing is expected to witness

significant growth in coming years as this market segment is comparatively very small and

has huge potential for further developments. MNCs have again begun hiring expertemployees who are provided with the luxury housing ben efits. Additionally, high net worth

NRIs are also propelling demand for luxury housing in the country. Both these factors are

expected to sustain the growth of luxury housing segment in long run.

We in this project discuss success and needs of Real estat e sector in India. We are

especially concerned with primarily with the service involved and its quality in India . We also

discuss finding for our observation of this sector our Suggestion and conclusion as an ending

note.

Considering the length of subject we have covered only Mumbai city and sub-urban

areas. We have not covered rent as a service and commission services.


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PEST Analysis of Construction Industry

PEST refers to all political, economic, social and technological factors affecting any industry.

The objective of PEST analysis is to objectively study the environmental factors facing a firm,

company or an industry. The external environment affects the company in many different

manner and unlike internal environment it cannot be influenced much.

Political Factors

The political factors affecting the construction and housing industry mostly consists of

documentations and permits that has to be obtained during the various phases of

construction of a structure and its sale.

Building Commencement Certificate:

Construction of a building or any such structurecannot take place unless and until the builder or the company secures a commencement

certificate from the authority; in case of Mumbai it is the BMC who gives IOD&CC -

Intimation of Disapproval & Commencement Certificate.

Floor Space Index (FSI): FSI is basically a ratio, which determines how tall buildings or a

structure can be constructed on a particular plot. The local authority issues it.

Occupation Certificate: After the completion of construction work of a building, the builder

or the company has to secure an Occupation Certificate without which the flats in the

building cannot be occupied for resi dential or commercial purposes.

Brihan Mumbai Corporation [BMC] Developing Plans: BMCs developing plans form the

most basic criteria in selecting a site. These developing plans chart out pre-defined areas,

which the BMC has already allocated for certain purposes.

E.g. In a given area, some land is reserved for plantation/farming, some piece is kept for

industrial establishments like the MIDC area and the other one reserved for residential

purposes. So the Builder finds out the type of land, which is suit able for his purpose, i.e.; if

he wants to build up a residential complex, then he has to do so in the area reserved for

residential purposes; as per the BMCs developing plans.

CRZ (Coastal Recovery Zone): According to this rule a builder cannot carry ou t any

construction within the radius of half kilometer from sea.

TDR (Transfer of Development Right): This right is available to a builder for utilizing the

additional FSI. Normally TDR is given by the local Municipal Authority who acquires the


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portion of land of builders either for the purpose of constructing road or for making

gardens.

Others: Apart from the above mentioned points there is also tax exemption that is given for

the construction of building on the land having area of more than 1 acre.

Economic Factors

Fluctuations in prices of inputs : Many builders tend to stop work when the prices of inputs

like cement, iron etc goes up so as to wait for the time when they expect the prices will

come down. This result in unnecessary delay in the work and the cost of wasting time would

actually be more than the increase in price.

Changes in demand : Changes in demand due to factors like changes in disposable income of

prospective buyers and inflation. Also with the easy availability of housing loans and tax

exemption on loans the demand for houses is rising.

Future Growth & Resale Value: Any project must be located in an area that if not fully

developed must at least be on the way. This is because people prefer those areas having

high resale value and will fetch them a good amount of gain.

Stamp Duty & Registration: Payments of Stamp duty followed by the registration of the

agreement are two important acts when one enters into an agreement with a

developer/seller. With the decrease in the stamp duty by 50% it is considered as a good signfor Construction Sector.

Social Factors

Credibility of the company/firm: People dont know what kind of materials has been used

in the construction of a building or a structure. Credibility of a builder or the comp any plays

an important role in convincing the buyer to buy the house and be sure of the quality of

construction work done. A low credibility or image can lead to poor financial performance. A

good image is not just built in a day, it takes years of servici ng the society through followinghigh standards of work in the process of construction and sale.

Perceived Image of the property developed: A flat in a so-called posh area may cost much

more than a one in a not so posh area. This factor can also determine the success of

failure of a project. A flat is selected on the basis of infrastructure facilities like water


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availability, transport facilities, nearness to schools, colleges, hospitals, shopping complexes,

leisure centers, etc.

Building Facilities : The builders may offer buildings that have swimming pools, health -clubs,

gyms & parks.

Technical Factors

Due to technical nature of the construction process, the technical environment keeps on

changing every day. There are developments in techniques used, materials used and various

other such aspects of the construction business. A few of such developments are as follows

Pre-structured Concrete Blocks: These are blocks of concrete, which are made in the

factories according to the dimensions of the build ing or structure to be built. It is just like a

jigsaw puzzle where these blocks are put together using a huge crane and joined together

using mortar by workers. This enables quick completion of work and also economies of

scale.

Mixture of Cement and Sand: nowadays in order to save time the constructor can order the

mixture of sand and cement directly from the suppliers as against the traditional way of

ordering cement and sand separately and then filtering them and then mixing it.

Other Equipments: other modern machines that are used in construction are the use of

huge drilling type of machines to dig the ground, which was before done by workers.


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7Ps of marketing mix:

1.PRODUCT:In marketing product refers to the totality of the offering.

In Construction industry the total product includes services offered by the contractor in the

support of the core product i.e. physical product.

For the construction industry products are :

Physical: houses, public and commercial facilities infrastructure & building products.

Service: expertise consultancy & design Persons and reputation: eg hafeez contractor

Ideas and proposals: urban regeneration, regional development and competitions

Essentials: water gas electricity telecommunication, transport facilities

Highly desirable: schools, hospitals, shopping complexes, leisure centers

Desirables: environmentally secure, adaptable.

Product offerings can be explained through the total product conc ept which consists of core

product, formal product and augmented product.

In the Housing industry:

The core product consists of: permanent accommodation / living space.

The format product consists of: locations, utilities, electricity, brand name, availability of

schools and hospitals nearby.

The augmented product consists of: security available clean environment, amenities.

2.PLACE:Product has to reach the ultimate buyer so the company works with its intermediaries to

bring to bring their product to the market. Marketing channels perform work of moving

goods from the producer to the consumer.


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In the housing and the construction industry construction cannot be transferred but here

intermediaries transfer information of distinct places about th e availability of

accommodation so that not having any idea about these constructions get to know about it.

In this industry distribution is done through real estate agents, who act as connecting tool

between the consumer and the provider.

3.PRICE:Agreeing the price for a piece of work seals the relationship between contractor and the

client. It is the central feature, and reflects the value placed on the relationship.

Prices are based on the combination of:

What the market expects? What the client can afford? What the nature of competition in the sector? What the contractor can afford to work for? Any specific factors concerning the particular job e.g. location material used? What is being agreed and paid for- whether completion of a bldg or wider process

offered supported by maintenance, pre sale and after care agreements?

Pricing considerations For housing a construction industry there are many considerations:

Capital projects & bldg activities are priced so that variable costs- the costs incurred as a

result of gaining the work-are covered. Ideally the price also makes a contribution to the

fixed costs of the contracted org. It is also necessary to consider charges incurred by the

contractors as the result of having to underwrite the project from inception to delivery &

from the need to acquire any specialists equipment and expertise necessary.

Building products are priced so that an individual perception of quality value and service are

at a level that the size and nature of the can sustain. It is also increasingly common to find

differentiate pricing approaches as competitors seek real and perceived price advantages.

4.PEOPLE:The people in housing and construction industry can be divided into groups:

Those who develop the product

They consists of location hunters architect builders. They are required to have technical

skills of geological mapping soil testing building designs and so on. The possession of these


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skills is of utmost importance because building cannot be constructed o n all types of land.

Also materials use to build houses in different regions because of climatic differences.E.g. in

England most houses are builds of woods whereas wood is not a viable portion in the

tropical area. Builders who do the final construction consists of civil engineers skilled and

unskilled labor

Those who market the product

These consists of marketing people who may or may not have civil engineering background

but certainly have the skills of understanding the customer as a well as the product. The

marketer uses all the tools that help to overcome the unique characteristics the service

industry. It includes the construction of a sample flat, which will break the tangibility factor

intensive advertising to overcome the perishability factor and so on.

5.PROCESS:Service Company can design a superior delivery process. Because of heavy initial, capital

investment, long gestation period and a speculative tendency (irregular demand) housing

and construction industry works other peoples money i.e. construction begins with advance

booking and then customers are suppose to pay installments most of the payment is made

after the product has been handed over this strongly experiences intangibility aspect of this

industry.

In this industry tangible industry is supported by services in which the services offered

enhance the client appeal for the product this relates to all aspects of the building and civil

engineering where the creation of [particular facility is supported by the project and

environment management, client liaison and specialist consultancy services and sometimes

through maintain refurbishment upgrading and facilities management services and for

public project sometimes also for general services to wider community.

6.PHISICALEVIDENCE:A service industry can develop a more attractive service environment where a service can

be delivered. In the housing and the construction, sample houses photographs and posters

of previous achievement can be displayed in construction offices or those can be shown to

the customers when they arrive for enquiry gets attracted to it.

There is a need to place the client need rather than the contractor expertise at the core of

all activities.


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Attention to all aspects of project design and inception, and the development of presales

services and activities the service aspects of work in progress and after sales activities.

Attention to quality and durability of the project when complete.

Acknowledgement that presentation is as important as technological expertise.

Continuous attention to service service extension and service development

Taking the truly enlightened view of the needs wants and demands of the clients and

commissioner of work the pressure on contractors and consultants and understanding them

Total enduring impact of activities on the particular environment and location in w hich it

takes place.

7.PROMOTION:The construction industry is concerned with following forms of pro motion:

The promotion of its capabilities and expertise to client and potential client The promotion of its finished products to the community and society at large The promotion of professionals within the industry to each other promoting specific

general and continuing inter relationships and confidence between architecture,

contractor quality surveyor planner other consultant civil engineers and su b contractors.

The promotion of general confidence, public sympathy and support for activities.The overall purpose of promotion is:

Promotion activities of the construction industry can be divided in following:

Primary promotion

Direct sales:

This is targeted at clients potential clients and other capable of using the distinct expertise

on offer. It involves opening up client face to face contact with those commission work and

inviting tenders and presenting the distinct expertise on offer in the cli ents best interest.

Targeted direct market:If this is to be effective it requires knowing who the people with influence are promotional

material, brochures, and achievements can then be arranged and presented and if

necessary specially prepare on client or sector specific basis.

Secondary promotion


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General advertising:

General advertising especially in the trade press to ensure continuing general awareness.

From time to time some construction companies have engaged in television and radio ads.

Logo:

Design and reinforcement: Billboards, hoardings and perimeter fences.

Attendance at trade, professional and regional fairs and exhibit

Other efforts include:

Speculative designs and proposals Tendering

Tertiary promotion

Positive media coverage

It is in various forms e.g. Contractors places the hoardings at side of the finished bldg

stating completed six months ahead of schedule

General positive pubic relations:

the current activity that comes under this hading at present includes general support for

schools, colleges and universities and contribution to the general amenities to communities


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Service encounter

The total number of interactions between the service provider and the customer is known

as the service encounter. These interactions are called as the moments of truth.

Construction is a secondary service sector unit but is gaining much importance now. In this

way, people (customer) coming directly in contact with service provider are very low.

The moments of truth here are during:

1. When the estate agent, who acts as a middleman, fixes a meeting between the service

provider (builder) and the customer (buyer). This is the first meeting/ interaction where

negotiation takes place.

2. The final meeting when the deal is finalized between the builder and the buyer to fulfill allthe formalities.

This falls under low direct contact service.

Service quality: RATER

The 5 dimensions of quality can be explained as follows:

RELIABILITY

Reliability under construction would mean if the builder gives timely possession to the

buyers and fulfills all his commitments.

ASSURANCE

Credibility: This is the trust developed by the builder, the goodwill that he has attained since

so many years. E.g. Raheja builders, people know that if they go to Rahejas they wont be

cheated. The trustworthiness is maintained since years.

Security: Strong foundation of building earthing, proper indicators on towers as a safety

measure, the building exterior paint to be s tain resistant.

Courtesy: Respect your customers and their suggestions. Be friendly and understand their

complains.


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Competence: the personnel have to be knowledgeable in their concerned fields so that any

issue raised on them will sort out as soon as po ssible.

TANGIBILITY

In construction, major quality dimension is the tangibility. Facilities provided are the

tangible factors such as e.g. a builder shows a furnished flat he gives good fittings & fixtures,

furniture, aqua-guard, intercom facility, elevators, etc. the most important tangible factor is

the locality of the building.

EMPATHY

Access: The customer should be able to easily access any information regarding our product.

The ways to access can be the site office present at the site itself, websites, some

organizations also have the facility of call centers, etc.

Communication: Listening to the customers needs and communicating in an easy language.

Understanding: To understand their needs and make changes according to their necessity.

RESPONSIVENESS

Willingness to provide prompt service to consumers. There are people appointed in large

organizations for handling queries of the customer.

Complain handling:

In Construction, there is a standard way of handling complains, the customer has to give his

complain in writing to the builder that can be before possession or after possession and

within 7 days action is taken. This also shows after sales service given by the constructors.

The procedure to lodge these complains can be explained as foll ows:

Screening and logging:

The date the problem occurred; a description of the problem, and any other information

should be formally being given in writing to the builder

Investigating:

After the builder receives the complain, he gathers facts about the problem and investigates

on the issue.


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Acknowledging:

Let the customer know that the matter is receiving attention and how long it will take to

resolve the issue.

Formulating a solution:

While formulating a solution, the important criteria to consi der include the warranty

obligations, customers expectation, and the cost versus benefit of alternative solution.

Here, within 7 days appropriate action is taken after considering these important criterias.

On person within the organization has the ulti mate authority and responsibility for

customer relations.

When a customer complains they expect 3 things:

1. Outcome fairness: In construction, if the builder fails to construct the building within the

mentioned period, then he has to give his customers compensation in the form of providing

housing facility to them for the remaining period. e.g. if the construction of the building is

delayed by 6 months then he has to provide the buyers with housing facility for 6 months.

2. Procedural fairness: Here, the builder takes the responsibility to solve the complain within

7 days of receiving it in writing.

3. Interactional fairness: The builder listens to the problem of the buyer and tries to resolve

it. Listening plays a very important role in communication. It is always considered here that

the Customer is always RIGHT


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How banks arrive at eligibility of home loan

applicants?

Vijay is a maintenance engineer with a private firm. His monthly take home salary is around

Rs 35,000. With many public sector banks offering single digit interest rates, Vijay feels thisis the best time to invest in his dream house. A two-bedroom house on the outskirts costs

about Rs 16 lakhs. Will any banker lend him this money? Is he eligible for a home loan of Rs

16 lakhs?

There are numerous factors that banks take into consideration when computing your loan

eligibility. Age of the applicant, his salary, repayment/credit history, savings, profession,

location of property, health condition and other debts have a direct bearing on the loan

amount sanctioned. Some professions are categorized as negative or risky by the lenders.

People in such professions may find it difficult to get a loan sa nctioned. On the contrary,

some jobs are considered more stable with lesser probability of default. They are on the

preferred list of most lenders.

It is imperative that the property an applicant wishes to purchase falls within the

geographical limits as defined by the bank. As a thumb rule, banks will lend to applicants

who can set aside 40 percent of their monthly income towards their home loan repayments.

Based on this, an individual's loan eligibility is calculated. It is assumed that a person who

earns more can set aside more money towards his EMI repayments.

How does a bank compute your loan eligibility?

Most loan eligibility calculators available on the Internet are based on a formula. The home

loan eligibility, in lakhs, is arrived at

by dividing the amount available for

the loan repayment with the

borrower by the loan installment per

lakh for the given tenure.

The simplest way to increase your

loan eligibility is by increasing theloan tenure. Consider Vijay's case. At

9 percent rate of interest and for a

tenure of 10 years, banks will

sanction him not more that Rs 12

lakhs. However, for a greater tenure

of 20 years his loan amount shoots up


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to Rs 18 lakhs. However, the longer the tenure of the loan, greater is the cos t of borrowing.

Applying jointly, with your parent or spouse, increases your loan eligibility. The incomes of

both applicants are combined when computing the loan eligibility. You can almost double

your loan eligibility with a joint loan.

Findings are as under

As the GDP increases the real estate prices also increases because there is a high degree of

Positive correlation between the real estate prices and GDP.

The infrastructure of India is also growing day by day so it adds to the better facility to

different sectors which affect the real estate prices.

The FDI into the country affects the real estate FDI and real estate having a positive

correlation leads to the boom in this sector. Increase in FDI from 2006 to march 2007 is

10%. Earlier it was 16% and now in 2008 it is 25%.

The interest rate also affects the real estate prices because it affects the lending and

borrowing by the investors.

The growth in the real estate sector is between 25-30% in a residential sector, 10-15% in

commercial sector and agriculture sector.

Housing sector constitute 80% of real estate in terms of value and 20% by commercial

sector.

In residential segment, availability of easy home finance and rising purchasing power has

driven the growth. Builders are launching high-end, life style residential products to cater to

the growing bunch of high net worth individuals.

In 2008 the growth of real estate sector is going down due to high inflation and hike in

home loan rates by the banks following the inc rease in bank rate and SLR by the RBI.

The outsourcing and IT/ITES industry have contributed to the demand for quality office-

space.

y The estimated demand from IT/ITES sector alone is expected to be 150mm sq. ft. ofspace across the major cities by 2010.


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Suggestions

The following recommendations are made by this paper -

Due to high prices the lower income group is not able to purchase the land, so govt.

should take measures to protect the lower income group.

The agriculture land covered into the commercial and residential purpose. But the

population is also increasing day by day. So govt. should steps for the same.

The investors should analyze the type of land in which they are going to invest and the

potential returns from it.

Privatization of Airports and ports needs to be speed up.

There is a lack of proper data and management of the real estate sector so govt. should

take the corrective steps in this regard so that the proper estimation and management ofthe real estate can be made possible.

Stamp duty is extremely high and must be rationalized and brought down to 2 -3% as per

global practice, which is now in India varies from 13-14%.


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ConclusionAfter studying all the factors of the real estate it can be concluded that the Real Estate is a

very wide concept and it is highly affected by kind and quality of service one provides to his

customers and decreasing gap between customer expectation in India and gradual increase

in service satisfaction level. The most important factor in the case of Real Estate is location

which affects the value and returns from the Real Estate.

India needs a stronger capital market base for property financing. Although interest in new

projects is most likely to come primarily from institutional investors, the rising middle class

is likely to seek new instruments aside from direct property investments in the medium

term. Even in this segment service standards are gradual increase an Industry is realizing it

need for better service to get better value for Investment and goodwill in market.

So, we can say that the investment in Real Estate in India is a very good investment

opportunity. But one should be very careful while taking decision in this direction due torising inflation and interest rates. Legal issues should also be kept in mind while choosing a

property. As of service is concerned one can rest assure of gradual increase in quality and

thus valuations.


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From www.sribd.com

1. International Research Journal of Finance and Economics - Prospects & Problems ofReal Estate in India by Vandna Singh(JMIT) & Komal (ITM)

2. How banks arrive at eligibility of home loan applicants? By Vijay ShreeReference:

Course book of BMS and B.com for 7 Ps and Service Encounter

Date post:	29-May-2018
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