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Housing Need

Jaisalmer city and Fort at sunset

Joining the Dots for the Future…A walk around Indian Real Estate Markets

By Blackstone, Construction Technologies, COVID-19, Housing Need, Modular Construction, Real Estate Markets

History doesn’t move in straight lines, we’re much too unpredictable for that: so nobody should be surprised that in the same month as a group of glum beancounters at the Office for National Statistics reported a 20.4% slump in GDP for the UK (the worst ever), their happier colleagues at the Land Registry were trumpeting a 2.6%, year on year increase in UK property prices. There isn’t a straight line between the two: the underlying decisionmaking is just too unpredictable to allow for anything more than a childish squiggle. It’s what practitioners of the dark arts of econometrics call “a random walk”, like a drunk stumbling home from the pub: we know where he started out from and where he ended up, but it’s the bit in the middle that’s a mystery. Why did the catastrophic oil crisis of 1973 barely make a dent on US property prices, having sent the rest of the economy into free fall? Why did an otherwise localised slump in US property prices cause economies across the world to crash in 2008? These are random walks between two points (or pints in the case of our drinker) … the trick is to join the points up. 

Which means searching for medium and long term trends, key drivers that act as a platform for what the future might look like: and there’s no better example right now than India’s Real Estate Markets.

According to an influential IBEF forecast, Indian Real Estate will be worth $1 Trillion within the next ten years (from a base of $120 Billion in 2017), and by 2025 (just five years away in case we forget), the sector as a whole will make up 13% of the subcontinent’s GDP. That’s worth reflecting on: despite the near term, COVID driven shocks, not to mention the pandemic’s catastrophic impact on overall levels of social cohesion, there is no straight line in sight: the subcontinent’s residential and commercial property markets are showing persistent and robust signs of long term growth, and this particular honey pot is proving as attractive as it was when, in 2019, overseas and mostly private equity investors staked no less than $14 Billion in the sector.

Blackstone alone has invested more than $12 Billion in Indian real estate since 2018: including the first of the subcontinent’s newly established REIT’s, which raised $670 Million in 2019 in collaboration with Embassy Group.

In response to (and partly in anticipation of) that inexorable trend, the Indian Government launched a series of property-related initiatives, including the Smart City Mission: delivering more than a hundred better-connected infrastructure and technology centres across the country and offering a prime opportunity for investors. Add to that the recent launch of the Alternative Investment Fund (AIF), which green-lighted investment across 1,600, previously stalled urban housing projects in major conurbations from Mumbai to Chennai and, of course, the continued resurgence of the Affordable Housing Fund. Prime Minister Modi’s Government has also approved the creation of 417 new Special Economic Zones, of which 238 are now live. Impactful as it might be at the moment, COVID 19 has neither the persistence nor potential to stand in the way.

As Blackstone themselves could no doubt testify, Foreign Direct Investment is a key part of this mix: increasingly responding positively to enhanced levels of market transparency on the subcontinent, a transparency that has acted as a powerful nudge to create a more investment-friendly environment increasingly aligned to western markets (and due diligence requirements in particular).

So there’s no straight line to follow in these turbulent (short term) times, only an increasingly less random walk firmly rooted by a long-term compass. And, to repeat the point, there’s no better example of that at the moment than Indian Real Estate Markets.

Find out more about Modulex

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Modulex is setting up the world’s largest steel modular buildings factory based in India. It was established by Red Ribbon to harness the full potential of fast-evolving technologies and deliver at pace to meet the evolving needs of the community.

Executive Overview

Every so often we have to raise our eyes from the papers on the table, and goodness knows we’ve had enough to distract our attention from the bigger picture over recent months: that’s why, as we gradually emerge from global lockdowns, I’m confident longer term trends will be much more important than any of our day to day fixations.

I’m confident, in short, that the future can’t and won’t be navigated by straight lines…

asset mangement

Building Back Better… More than ever before, that means Modular Construction

By Construction Technologies, Housing Need, Modular Construction, Productivity No Comments

Building back after an external shock (like COVID) can present formidable economic difficulties, but housing and public sector programmes present especially complex challenges at the moment.
In this week’s Newswire we examine how technology and market forces are coming together to help us build back better.

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Kota, Rajasthan, India,- March 2020 : Labour is working on a new construction of building in Kota

Compared with What?… Consolidation Counts in Indian Real Estate

By Construction Technologies, COVID-19, Housing Need, Housing policy, Modular Construction, Productivity

Compared with the same period in 2019, Real Estate sales fell globally in the last quarter by 80%: but the clue’s in the question, the rate of decline is constant across the globe, so territorial markets are more or less as stable and ready to move on as they were before lockdowns were imposed. In India, for example, a nine-year programme of deregulation had already created rapid market consolidation by the end of last year, with almost half of existing developers leaving the sector between 2011 and 2019: no bad thing frankly, given most of them were smaller, flighty operations; incapable of complying with increasingly rigorous safety requirements, GST Regulations and (darkest of all) financial compliance provisions: remember all those rupees under the bed that Demonetisation was designed to get rid of?  

Schumpeter called it Creative Destruction: in other words, we’re better off without them…

The plain truth is that COVID downturns are operating more or less uniformly across the globe and are (hopefully) short-term: experienced with equal force from Manhattan to Mumbai and Berlin to Beijing, but proactive market consolidation is what really matters. And when it comes to that, Indian real estate is showing every sign of embracing a period of successful change, making it stronger than ever before. Joseph Schumpeter would have been proud…

So, just for a moment, think back to the subcontinent in 2019, dented since by COVID, but already by then experiencing unprecedented levels of consumer demand, renewed confidence, greater access to finance and, more than anything else, the success of the Affordable Homes Programme under Prime Minister Modi’s stewardship. These are the same conditions that are locked and loaded into India’s future as it emerges from pandemic restrictions. Even the most cynical observers can’t claim they’ve gone away…

All of which makes the second wave of consolidation increasingly likely on the subcontinent: already cleared of developers with little or no regard for compliance strictures, we can now look forward to radically improved business practices, new and improved sectoral strategies and key changes in construction technologies (with Modular Construction front and centre of the pack). Any Developer still clinging to outdated bricks and mud technologies, blinkered to the reality that growth will come by building affordable homes rather than another glass skyscraper in Mumbai, are certain to be consigned to the wastebasket of history.

Recent market studies forecast developers wedded to one or other of those fossilised views, some 30% of developers in all, are likely to leave the industry (forever) within the next year.

So, it’s true, property sales have fallen because of COVID: but that’s neutral, it’s the same the whole world over. Look instead to what pre-COVID economies looked like before COVID snapped its jaws, and nowhere is there a more resilient market than on the subcontinent: poised to become the most populous on the planet, more aspirational than ever before, increasingly urbanised and better connected than at any point in its history. Previous consolidation has made Indian markets leaner and better able to address challenges, but they are now profiled for future consolidation, and that will make them stronger still.

Find out more about Modulex 

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company. It was established by Red Ribbon to harness the full potential of these fast-evolving technologies and deliver at a pace to meet the evolving needs of the community.

Executive Overview

There is a severe shortage of domestic housing stock across the globe: but as economies start to kick into gear after emerging from worldwide lockdowns, I’m sure those with solid and resilient foundations will be most successful in meeting burgeoning demand.

India went into lockdown ahead of the field, and it looks like it’s going to come out ahead of the pack too…

Modular prefabricated houses made of panels with large panoramic windows.

Not so much a Policy Imperative as a Crisis…Modular Construction has the Answers

By Construction Technologies, Housing Need, Housing policy, Modular Construction, News, Productivity

Best estimates are nearly 250,000 people left London during the COVID lockdown to live in their second homes, seeking comfort in a pale view of the hills or the slopping of the sea (or, in Dominic Cummings’ case, the car park at Barnard Castle). And some of them, perhaps looking for a third home, spent the idle hours rootling around the Internet looking for property bargains, with real estate prices slumping in the UK by 10% in May alone (they’ve rallied since, thanks to a new Stamp Duty regime). So what’s wrong with this picture? Well, for at least the last thirty years the UK, and London in particular, has been cursed by a shortage of new homes: housing lists have never been longer, rents have never been higher and houses and flats never more expensive than they are now. The UK also has steeply rising rates of eviction, radically increased homelessness and a new generation of millennials who are resigned to sleep on a friend’s sofa or face the prospect of living with their parents into their forties.  

Being locked in during the lockdown was no picnic for any of us, but spare a thought for how hard it hit the homeless and those living in overcrowded flats with children climbing up the walls and no garden to escape to. Spare a thought for those who were safe and secure in March, only to emerge from the lockdown with no job and the imminent arrival of eviction papers. These are real issues facing real people every day. We can’t all escape to the hills and the seaside…

And the United Kingdom certainly isn’t alone in all this: India to is facing an acute housing shortage and in the United States (the richest country in the world, lest we forget) no less than 567,715 people are homeless: that’s seventeen in every ten thousand.

So what’s to be done? 

First of all, let’s express the issue with a little more clarity: current housing policy, not just in the United Kingdom but across the globe, has so far been driven by a series of policy imperatives designed (unsurprisingly) to make builders build: low-interest rates, soft planning protocols, minimum regulatory thresholds and (at least until 2008) liberal financing structures. All of them working to the advantage of investors in real estate and existing homeowners: supporting the stock of existing housing wealth, but doing little or nothing to create new, low cost and environmentally friendly homes for those with more pressing housing needs: Stamp Duty reforms are no kind of answer.

And as part of this increasingly polarised dialogue, excessively high front-end construction costs are often (indeed usually) cited as a driving factor. Building new homes on conventional models is expensive, and governments are reluctant to invest directly in new programmes: so even though local authorities in the United Kingdom can now borrow to build, for decades now they have received virtually nothing from Central Government towards funding affordable housing programmes. 

But it doesn’t have to be that way…

The technology already exists to create new homes at volume and at pace, not only with lower front-end costs but lower costs across the board: and with significantly more environmentally friendly outcomes too. Modular Construction allows units to be created off-site in controlled conditions, with delivery rates three times as fast as traditional methodologies, lower development costs and optimal quality. So its no wonder the McKinsey Global Institute reported this year that Modular Construction in European and the US Markets will be worth $130bn by 2030. Not only is it quicker, less expensive and more efficient, but it plugs directly into the pressing needs of our troubled planet: providing a workable platform capable of meeting burgeoning housing needs across the globe.

We might not all end up with second homes with a pale view of the hills, but there might be a better chance of all of us having a home.

Find out more about Modulex 

Modulex Construction is the World’s largest Steel Modular Building Company. It was established by Red Ribbon to harness the full potential of these fast-evolving technologies and deliver at pace to meet the evolving needs of the community

Executive Overview

I’m acutely conscious that all across the globe we’re facing a dire shortage of domestic housing, and increasingly aware that existing housing policies no longer providing any of the answers. We need a paradigm shift to meet what could otherwise be a looming crisis.

That’s why I’m convinced modular construction will be so important: it delivers at the pace we need, working off low-cost platforms and with quality assurance levels conventional construction technologies simply can’t match.

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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