Category

Housing Need

The Age of the City…Rural Migration has Reshaped India’s Real Estate Markets

By Affordable Housing, COVID-19, Housing Need, India, Mainstream Impact Investment, Modular Construction, News, Real Estate Markets

Increased levels of urbanisation in India (and elsewhere) are both an opportunity and a challenge: we have to learn to build homes better, faster and smarter, which is why Modular Construction is becoming so important: It will be a key part of addressing homelessness across the globe.

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A Time to Build and Buy…Indian Real Estate is facing a Perfect Storm of Opportunity

By Affordable Housing, COVID-19, Housing Need, Housing policy, News, Real Estate Markets

If it walks like a duck and quacks like a duck, it’s probably a duck: which is good news if you’re looking for a duck. And the same faithful formula applies to commercial markets: forget all the background noise, if it’s growing and looks like growing more, it’s probably good to invest in. You don’t need to be Warren Buffett (or Aristotle) to work that one out, and right now the needle for Indian Real Estate is reading high on both counts. Despite the (to put it mildly) dampening effects of COVID lockdown restrictions, the subcontinent’s property markets are facing a perfect storm of growth and opportunity…so this is a time to build and buy.

The sector has grown by 11.2% over the last two years and market analysts now predict pre-COVID levels will be reached again before the third quarter of this year, with the Affordable segment expected to perform especially well in areas including Hyderabad, Bangalore, Mumbai and Pune. 

So what exactly are the factors combining to make this perfect storm?

Disruption and Acceleration

Well, first of all, there’s COVID itself. Like most major market disrupters, the pandemic (beyond its obvious short term impact) has not delayed growth: it has turbo charged existing trends. With more time locked down at home, people are spending more time searching for (and buying) new properties online, which has created a sharp spike in demand. Competitive bidding thrives when there’s little else to look at and nothing else to do, and prices are shooting up as a result. Then, of course, that old (new) favourite Zoom has brought us virtual viewings as well, so you didn’t even need to leave home before splashing your cash. And when you bear in mind that India has the fastest growing population of any large economy on the planet, that’s a lot of cash to splash.

High Yields, Low Interest

The Reserve Bank of India has held the all important repo rate at 4% for several months, and last month announced its intention to keep it there as long as necessary to support future economic expansion, which means two things for real estate. First, the consequential fall and resulting long term hold in deposit rates makes it more attractive than ever to invest in rental properties where yields are holding up at 3% annually: making even a relatively modest appreciation year on year increasingly attractive. And, secondly, tax breaks will bring down still further the real time cost of borrowing for those in higher income brackets, making the move to property investment still more advantageous. With a characteristic sense of understatement, Prashant Thakur (Director and Head of Research at the influential Anarock Property Consultancy thinks “buying now means buying at the lowest possible price”.

He might be right there…

The REIT Revolution

Prime Minister Modi’s Government introduced the Real Estate Investment Trust (or REIT) to the subcontinent in April 2019, with the aim of expanding commercial and property investment, and the pandemic has done little to dilute its impact. Even during the most stringent lockdown restrictions, rental collections, the lifeblood of any REIT, still remained strong through to the first quarter of this year at 97% saturation (according to Motilal Oswald Real Estate): underpinned, of course, by GST and RERA initiatives that have progressively improved liquidity levels within the financial system as a whole. 

Overseas investors haven’t been slow to pick up on the opportunities either, with a surge in levels of FDI likely to drive an even strong recovery in commercial and residential assets over the course of the year.

A Brighter Future

All of which is good news for the future of the subcontinent as a whole: real estate accounts for 7% of India’s economy, the second biggest employer in the country (after agriculture) and a cornerstone for employment in more than 220 ancillary industries. And current growth trends within the sector are projected to increase real estate’s share of the economy to 13% within the next four years.

So now is the time to build in India…now is the time to buy.

Executive Overview

Indian Real Estate has always been a key area of focus for us, and I’m genuinely excited by the trends emerging on the subcontinent as lockdown restrictions are eased. It is, indeed, a perfect storm for growth and opportunity.

 Invest in Red Ribbon Asset Management 

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital.

If you would like to know more about joining our Mainstream Impact Investment journey click here

Building in Sustainability…Modular Construction has long-term answers for the Planet

By Affordable Housing, Construction Technologies, COVID-19, Housing Need, Modular Construction, News

What can you do with a broken brick, clotted with mortar and torn from the heart of a demolished building? Well, you could get more bricks, lay them in a line and offer them to the Tate Gallery as an “Installation”, but short of that (frankly unlikely) option, the brutal answer is “not very much”. And the same goes for all that twisted, rusting steelwork, left scattered behind on the demolition site. Like the broken bricks, it is almost impossible to recycle and will almost certainly end up in a landfill site. And at the other end of its clunking life cycle, traditional on site construction currently accounts for an extraordinary 36% of worldwide energy consumption and 40% of global CO2 emissions: all those trucks belching out exhaust fumes, crawling to and from inner city developments to feed the daily demands of dumpers, drills and jackhammers.

Across the World four billion tonnes of concrete are poured every year, adding 2.8 billion tonnes of CO2 to our precious and fragile atmosphere, which is more than double the 1.04 Billion tonnes of CO2 produced annually by worldwide aviation, even in the years before Pandemic restrictions more or less shut it down (www.ourworldindata.org).

You get the message…Dinosaur Construction isn’t good for the Planet.

Sustainable Construction

On the other hand, Sustainable Construction can put a stop to all that: making use of renewable and recyclable materials, reducing energy consumption and creating a healthy, environmentally friendly environment…not to mention protecting the Planet in the process.

So why, according to the 2018 World Green Building Trends, Smart Market Report (www.worldgbc.org), do more than 50% of construction companies still believe sustainable construction technologies are more expensive? Perhaps they simply prefer laying broken bricks in a line…in which case (to save them looking it up) the contact number for the Tate Gallery is +44 20 7887 8888 (its closed at the moment by the way).

But whatever their business plan, they couldn’t be more wrong…

Less Expensive, More Efficient

Sustainable Construction is not only less expensive than dinosaur construction technologies, it also supports lower operating costs once the building is completed: all of which feeds directly into the bottom-line.

Take Modular Construction for instance: pre-assembled units are manufactured off site in climate controlled conditions, which means fewer trucks choking their way to the site every day and fewer days lost with workers sheltered in huts from the rain. Buildings constructed using advanced Modular systems are 30% lower in price than their conventional equivalents and they typically re-use 80% of their components, which fits in perfectly with the demands of the Circular Economy (www.oecd.org): prolonging the useful lifespan of key components.

That all adds up to annual savings of more than £400 Billion across worldwide markets, added to which waste levels are lower too, so you may not need to contact the Tate after all…

Smart builders are already factoring these costings and efficiency savings into their tenders, offsetting front-end construction costs and reducing environmental impact as part of the new Circular Economy. 

What’s not to like?

Modulex Construction

Modulex Construction (www.modulexglobal.com) is the World’s largest Steel Modular Building Company. It was established by Red Ribbon (www.redribbon.co) to harness the full potential of fast evolving technologies and deliver at pace to meet the evolving needs of the community.

Executive Overview

I don’t think it’s sufficiently understood how energy hungry and polluting conventional construction technologies can be. So given current demands for affordable housing and new infrastructure projects, it really is time to look for some sustainable alternatives.

 Invest in 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

If you would like to know more about joining our Mainstream Impact Investment journey click here

Can Unprecedented Demand Create a Slump in Property Prices…Of course not, Global Real Estate is as Strong as Ever.

By Affordable Housing, COVID-19, Housing Need, News, Real Estate Markets

Buying an average London house would have set you back £55,000 in 1985: but the same house would cost £84,000 five years later, and by 2010 it was selling for £283,000. Last year it was worth £490,000. That’s an aggregate increase of 890%, which is a pretty good going, bearing in mind £55,000 invested in equities over the same period would now be worth £359,700 (240% less): added to which you can’t live in a pile of share certificates, and (unless you happen to be married to him (or her)), your broker won’t be cooking Sunday lunch any time soon. With bricks and mortar consistently outstripping equity markets for decades, it’s no wonder Englishmen (and women) treat their home as their castle: because their castles are more like Fort Knox…but that seemed set to change last year.

With gruesome inevitability, we are (of course) talking about COVID…

Economic growth slumped dramatically in the aftermath of the Pandemic: in the third quarter of 2020 the US Economy suffered a precipitous 31.4% fall in GDP (the biggest since the Wall Street Crash), and in the UK GDP fell by 16% over the same period. In India the equivalent figure was 23.9%. All of which had an immediate impact on property prices across the globe, with forecasts from March 2020 predicting a deep and sustained slump in real estate…because, so the theory goes, it’s hard to buy a new home if you’re locked down in the one you’ve already got.

All that changed in six short months…it was, after all, only a theory.

Property Markets on the Rise

By the end of the 2020 US real estate was already looking at record-breaking returns (in the right direction): according to Zillow (www.zillow.com), a total of 5.64 Million homes were sold in the United States up to the end of last year, a 5.6% increase on 2019; and average house prices rose by 8.4%. India had an even more spectacular year, particularly in the tech heavy, Chennai and Bangalore sectors… ESR Group (www.esr.com/en) predicts sales will continue to increase by a steady 3.8% going into 2021: the most optimistic projection since 2016.

And part of the reason for all this is, of course, the Internet which has become a much bigger and more ubiquitous part of all our lives: stuck at home and glued to the screen, buyers are more competitive these days, forced to move quicker to snap up their new home at the speed of an electron. And then there are lower interest rates too, the lowest for over three hundred years: the Reserve Bank of India is now widely expected to reduce its benchmark repo rate by a further 50 basis points by the end of 2022, expected to bottom out at 3.5%.

So however difficult the times might be (and there’s no denying they’re difficult), there’s never been a better time to buy a new home…

Over on the supply side, and largely as a result of the same criteria, construction companies are finding it increasingly difficult to keep pace with the demand for new homes and houses, all of which has contributed to higher prices: demand has increased by 50% since 2010, but supply has fallen by 33%, with a particular shortage in supply of previously owned properties. 

Affordable Housing

Sounds like good news then … but there’s a problem.

A combination of reduced interest rates and rising property prices is also likely to create a shortage in affordable housing. For those in housing need, escalating prices only exacerbate the problem, which in turn places an added burden on construction companies. That’s why more and more suppliers, every day and supported by government programmes and incentives are turning to Modular Construction to deliver that most basic of human aspirations:  the home of their dreams. 

A Castle they can call their own…

Executive Overview

As Mark Twain might almost have said, rumours of the death of Real estate have been greatly exaggerated: despite COVID restrictions, global property markets are booming and seem set fair to prosper over the course of the coming years.

 Invest in Red Ribbon Asset Management 

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital.

If you would like to know more about joining our Mainstream Impact Investment journey click here

All Set and Ready to Lead…India will be at the Head of the Pack for Post-COVID Growth

By COVID-19, Housing Need, India, Mainstream Impact Investment, News

In last month’s Asia 2021 Outlook (www.nomuraconnects.com), Nomura forecast a 9.9% growth in Indian GDP by the end of 2021: that’s more than China (9%), and way more than the UK (5.5%) and the United States (4.7%), all of which are running off historically low recovery platforms as a result of the Pandemic.

The UK’s forecast, for example, may be the highest since the 1980’s, but according to the Office for Budget Responsibility (“OBR”) the economy will not return to pre-Pandemic levels until the last quarter of 2022. Investors would do well to remember that even a dead cat bounces…

On the other hand, India is expected to go on to deliver GDP growth of 11.9% by the first quarter of 2022, far higher than pre-Pandemic levels.

None of which should come as any surprise.

Post-COVID Growth

Before COVID gripped its chill hand on economies across the planet, GDP on the subcontinent was growing at a rate of 5.02% annually, barely half of the figure now being forecast by Nomura for the coming year. So unlike the UK there’s certainly something more than bouncing back at work here. Just look at the underlying data…in the second quarter alone, Nomura expects Indian GDP to grow by 32.4%, which means the so-called “base effect” of COVID will be completely eliminated on the subcontinent within six months (as opposed to two years in the UK).

Ten years ago the comparable (World Bank) figure for growth on the subcontinent was 8.5%, and in 2016 it was 8.26% (www.worldbank.org). So the latest Nomura forecast is well within the parameters of an already established, upwards growth trajectory. In fact, at 9.9%, it even foreshadows a sharp(ish) upwards tick over the near term.

And once again, that can be usefully contrasted with comparable trends for the UK economy over the same period. In 2010 GDP grew in the UK by 1.95%, but by 2016 it had fallen back to 1.92%. And before COVID struck, it had fallen back again to 1.41%. That’s why even on the basis of the latest OBR data (www.obr.uk), any UK recovery will still be two years behind India, heading for a downturn on what are already historically low figures. There’s no sign of an upward tick any time soon in the UK, sharp(ish) or otherwise.

So what’s the reason for those stark differences, and what does COVID have to do with it?

Well, there are three key indicators.

First of all, the UK has built up a staggering Budget Deficit of £394 Billion for the year to March 2021: struggling to balance massive recovery spending with dwindling tax receipts.

As a whole, UK national debt currently exceeds £2 Trillion, which is more than 100% of GDP, and its expected to stay that way for at least the next five years. Putting it mildly, none of this is a healthy foundation for future economic growth.

But even allowing for post COVID growth and recovery programmes on the subcontinent and an unprecedented level of public infrastructure spending, India’s deficit is only 17.9% of projected GDP (less than a fifth of the UK figure), so it has vastly more headroom for growth.

And then, secondly, there’s that tried and trusted bellwether of growth: Inflation.

As Keynes once said, there’s no inflation in a junkyard: upward pressure on prices is usually a reliable indicator of healthy levels of consumer demand, and demand is a significant driver for growth.

In 2020 the UK inflation rate slumped to 0.3%, which is the lowest level on record. And there’s a double whammy too: as the economic strictures of COVID are eased, inflation is likely to rise with a parallel increase in interest rates: so it’s not a good time to be holding £2 Trillion in debt (see above). On the other hand, inflation on the subcontinent is currently 4.95%, which is slightly higher (but not disturbingly so) than the midpoint 4% target maintained by the Reserve Bank of India since 2016, and in turn that reflects a robust level of consumer demand as a result of a burgeoning, increasingly wealthy and product hungry population.

And then, finally, there’s Housing: an Englishman’s home isn’t just his castle, over the years it’s been a pretty good investment too.

Despite the shocks of COVID and the worst recession for three hundred years, house prices in the UK rose to a six-year high at the end of 2020, which speaks to a certain confidence in the future…or does it? Across the board, analysts in the UK are now predicting a sharp decline in house prices.

Halifax (the country’s biggest mortgage lender) expects a fall of between 2% and 5% over the coming year, and the OBR is even more of a Cassandra: forecasting an 8% drop in prices during 2021. That’s certainly not a trend reflected on the subcontinent…house prices are going through the roof from Mumbai to Chennai.

So with strong fundamentals in Housing, Monetary and Macro Economic policy, India seems all set for further growth; and despite the fact that the traumatic impact of COVID must induce a necessary caution into any forward looking analysis, there’s little reason to doubt Nomura’s figures. After all, history has given us the compelling lesson of Spanish Flu: a hundred years ago we were also socially distancing, wearing masks and watching fearfully as old certainties crumbled away. But within two years global economies had bounced back with a vengeance… there’s no reason to doubt that they can (and will) do it again.

Expect India to be at the head of the pack when they do.

Executive Overview

The World has come a long way since March 2020, and we’ve learned a lot of lessons along the way: but with effective vaccines now on the horizon, and signs of economic recovery emerging across the Planet, it’s time to look to the future. All of the data now suggests India will be playing a leading part.

If you would like to know more about joining our Mainstream Impact Investment journey click here

Voting with Their Feet…Indian Migrant Workers are Redefining the Subcontinent’s Housing Market

By Affordable Housing, COVID-19, Housing Need, Housing policy, Modular Construction, News

India’s migrant workers are voting with their feet: streaming onto railways and roads, taking to bikes and byways and making their way back to the Cities they deserted in the aftermath of the pandemic. It’s the biggest movement of people on the subcontinent since Independence more than seventy years ago, and it’s set to have a profound impact on the future of Subcontinent’s housing market across India, from Chennai to Mumbai and all points in between (more of which in a moment)…

Movement of workers back to the cities

A recent survey conducted by the Inferential Survey Statistics and Research Foundation (snappy name, snappy stats) reported 67% of 2,917 migrant workers from 34 Districts are determined now to make their way back to jobs in the City (www.issrf.org.in): a fact already confirmed by the volume and value of cash transfers since the lockdowns were imposed in March.

That old reliable bellwether of migrant activity: sending money home to mum and dad. In the first few weeks after COVID-19 struck cash transfers fell in value by up to 90%, but now they’re back now at 85% of pre-pandemic levels…a sure sign workers are moving in high numbers from the countryside. And since August, non-suburban passenger traffic on India’s railways has virtually doubled.

It’s impossible to overstate the importance of this trend, given migrant workers make up 20% of the subcontinent’s workforce and play a vital part in the success of a number of key sectors: especially informal market segments and MSMEs, which together make up 50% of the subcontinent’s GDP.

No surprise then that for India’s construction sector, which is particularly reliant on migrant labour, the Modi Government has been keen to roll out a raft of new measures to make sure they get back on site as quickly as possible. In May the Minister of Home Affairs produced a policy paper recommending migrant workers should be automatically enrolled for Ayushman Bharat: the Government’s flagship health insurance scheme, providing them with ready access to cashless medical facilities on site (which the vast majority either don’t have back home in the countryside, or are denied by discordant local government regulations). There will also be a new Migrant Workers Welfare Fund to make sure help housing assistance gets to where its needed most (which in this case means India’s Cities: www.labour.gov.in)so you can be sure the pace of urbanisation on the subcontinent isn’t going to be slowing down any time soon.

India and the Subcontinent’s Housing Market

And given India’s already burgeoning need for affordable housing, it should come as no surprise either that the demand for City based real estate is likely to result in an unprecedented surge in real estate growth.

All those workers have to have somewhere to live…and there’s certainly no shortage in demand for something to build.

Which brings us back to Chennai and Mumbai: along with Bangalore, both have become centres of technological excellence, as India continues to establish itself as the planet’s distribution hub.

Skilled workers are moving there and new infrastructure systems (roads, railways and business parks) are being created on an almost daily basis, pushing house prices through the roof (so to speak). That’s undoubtedly a trend that is likely to gain added vigour from the return of migrant workers.

India needs those construction workers back on site, but it also needs to deliver affordable homes at sufficient pace to meet the dizzying needs of what was already the fastest growing population on earth.

That’s why developers on the subcontinent (and around the world) are increasingly turning into modular construction technologies, which not only reduce delivery times by 60% but also ensure cost efficient and compliant delivery standards. This is a sure-fire way to improve the subcontintent’s housing market.  

After all, as India votes with its feet, it also needs somewhere to live…

Executive Overview

Modular Construction delivers faster, at lower cost and with higher quality than traditional alternatives: it’s perfectly positioned to meet the growing demand for affordable housing, not only in India but also across the world.

So as we welcome news that migrant workers are coming back to the Cities, yes: let’s give them somewhere to live too.

If you would like to know more about joining our Mainstream Impact Investment journey click here

Better Connected than Ever? – How Connectivity boosts Indian Real Estate.

By Affordable Housing, Blackstone, Construction Technologies, COVID-19, Economic Growth, Environmental Policy, Housing Need, Housing policy, India, Natural Capital, News, Real Estate Markets, Sustainable Growth

All roads lead to other roads: a dizzying complexity of cables, rail and road networks have literally girdled the earth, making us better connected than ever before. A hundred years ago it took twenty days to travel by steamship from London to Mumbai, now it takes nine hours by plane.

Subject to lockdown restrictions, you can cross the English Channel in two hours by ferry (plus three more waiting for the driver in front to get back to his cab), or else zip through the Tunnel in 30 minutes; and the electrons that carry your Internet messages travel at 2,200 Km a second, which is probably why Zoom is doing so well at the moment.

But none of this happened by accident: it was all planned, built and delivered to meet economic demand…except, of course, the electron, which does what it does by itself. Economic progress is everywhere driven by connectivity.

And that’s where Big Government comes in: periodic swings in the private funding cycles needed to build all those airports, roads and railways are increasingly being offset by government deficit spending programmes (or quantitative easing as it’s now known: the deficit’s more attractive, younger sister). Only big government is big enough to dampen regular (and inevitable) private sector investment fluctuations, which is why most advanced economies over the last forty years have set fiscal spending targets of up to 20% of GDP.

Nothing less will level out the swings and troughs, and without it the roads, railways and airports won’t get built at all…the Channel Tunnel started out as a private venture, ran out of money and finished up nationalised in all but name. Without Big Government you wouldn’t be able to zip under the Channel …you’d be stuck behind a lorry at Dover.

It’s a lesson India has taken to heart.

Connectivity boosts Indian real estate. How?

Over the next ten years the subcontinent is expected to invest a staggering $715 Billion in its new rail networks, with full electrification expected by 2024 and the entire system becoming carbon neutral by 2030 (www.ibef.org/industry/indian-railways).

By 2050 India’s railways will comprise 40% of rail services across the world, meeting a surge in passenger numbers driven by an increasingly wealthy travelling public. All of this is being powered by Big Government (Prime Minister Modi’s Government to be precise): including a programme to expand investment in new rail terminals, new stations and more extensive container operations across the subcontinent (www.outlookindia.com).

And the picture is pretty much the same on India’s highways where the network has doubled in size (from 71,000 Km to 142,000 Km) in the last ten years. As with rail, the expansion is being driven at pace to meet unprecedented levels of demand from a burgeoning and increasingly wealthy population, in stark contrast with the United Kingdom where road traffic levels have increased by 80% over the last twenty years, but capacity has risen by a sluggish 10% annually: and even that unimpressive figure is falling off year by year.

All of which means India is now better connected than ever before; and in combination with those same (unprecedented) demographic trends on the subcontinent, enhanced connectivity is also having a radical impact on India’s domestic housing markets. New Science parks in Chennai and Bangalore and new railways and highways in Mumbai are pushing prices through the roof as an increasingly urbanised population embraces the opportunities offered by better communication systems.

The improvements to connectivity boosts Indian real estate. So with all roads leading to other roads, it means we’re better connected than ever before…but nowhere is that more apparent at the moment than India.

Invest in Red Ribbon Asset Management

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital through innovative programmes like the Eco Hotels Project.

Executive Overview

I suppose it’s a truism that property values are all about location (and location, location): but what’s interesting in India at the moment is just how radically the location itself is changing.

Taken together with an increasingly wealthy, tech savvy and burgeoning population, the Modi Government’s radical infrastructure programmes are re-shaping the commercial environment and pushing property prices higher than ever before.

A Disruptive Innovator…Modular Construction has become Housing’s Future

By Affordable Housing, Construction Technologies, COVID-19, Economic Growth, Environmental Policy, Housing Need, Housing policy, Modular Construction, News, Productivity, Sustainable Growth

“The arrogance of success is assuming what you did yesterday is enough for tomorrow”: William Pollard wrote that 100 years before Disruptive Innovation theory was formulated in 1955’s Harvard Business Review, but he perfectly captured the essence and importance of understanding disruption innovation in a modern economy.

Think of established companies like Amazon, Google and Uber, business models that have all disrupted existing markets and delivered outcomes that are radically reshaping our future (and our present come to that).

But disruptive innovation is driven as much by market need as invention, and burgeoning housing demand across the planet is currently driving change like never before…so welcome to the world of Modular Construction, and a new future for housing.

Using outmoded technologies, traditional construction companies have become increasingly focused on long-term (high value) projects, where profit margins are high enough to nurture a culture of inefficiency.

All those piles of rusting steel and timber left scattered around when the project finishes, fossilised remnants of yesterday’s world: all those days lost to rain when workers huddle in huts waiting for the sun to come out, and still more days lost waiting for delayed (piecemeal) deliveries, brought slowly to the site by a seemingly endless convoy of lorries.

But, by definition, all that waste matters more if margins are tighter: on lower margin projects, waste and delay on such an industrial scale can turn a viable development into a loss-making disaster.

That’s why traditional developers have (traditionally) paid far less attention to affordable and mid market housing projects, preferring to focus on profitable customers and build yet another penthouse studded glass tower: the inefficiencies of their business model matter less when the client is a Russian oligarch.

Which means more rusting steelwork, more days lost and more time wasted waiting ankle deep in mud for the latest lorry full of bricks to make its way at walking pace through another inner city traffic jam. This outdated model largely ignores speed of delivery, because speed of delivery largely doesn’t matter. Russian Oligarchs have all the time in the world…they can wait.

But the homeless can’t wait: according to Shelter (www.shelter.org.uk) 320,000 people are currently homeless in the United Kingdom (one in 201 of the population), in the United States the figure is 567,000 (a year on year increase of 40% since 2017), and in India 1.77 Million are in housing need despite the Modi Government working to deliver its ambitious Affordable Housing Programme (www.bajajfinserv.in/housing-schemes), striving hard to meet the demands of the fastest growing population on the planet.

And that’s where disruptive innovation comes in…

Adopting smarter and more efficient technologies, smaller construction companies can challenge these dinosaur incumbents: targeting market segments they either can’t or won’t reach, and that means in particular the homeless and those in housing need.

Economic orthodoxy tells us these smaller (disrupter) companies will then move on to gain a progressive foothold in increasingly higher margin segments by delivering better functionality at a lower price.

By making use of their core technological advantage: and finally, the dinosaur developers will also adjust their own business model as disruption takes root: bad news for Russian oligarchs looking for another penthouse, good news for the rest of us.

Modular Construction is a paradigm case in point: units are fabricated off site and delivered in ready to build panels, so no more convoys of lorries delivering materials piecemeal and no more waiting endlessly for them to arrive.

Built to order in a controlled environment, modular units are also higher quality and waste levels are lower, and costs are lower too.

It enables modular platforms to deliver projects at a third of the cost of traditional alternatives, which is why they are moving into (and will eventually take over) lower margin segments in a way traditional developers at the moment find unfathomable.

And it’s why in time dinosaur developers will be forced to change their business model …that’s the power of disruptive innovation.

What we did yesterday is no longer sufficient for tomorrow: Modular Technologies are important for all our futures.

Find out more about Modulex

Modulex modern method of construction

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.

Modulex is setting up the world’s largest steel modular buildings factory in India.

Executive Overview

According to McKinsey more than 80% of developers are now to a greater or lesser extent committed to modular construction models: that should come as no surprise to anyone. Modular construction delivers faster, at lower cost and with higher quality thresholds than traditional alternatives.

And now, more than ever, we need those benefits to meet the planet’s burgeoning housing need. It’s time for the world to move on…

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.

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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…

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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