While the COVID-19 pandemic shook the economy in general and the real estate market in particular, developers across the country also woke up to an unexpected but pleasant reality – client conversion rates improved following the pandemic. When the lockdown was imposed, footfalls dropped to 35%-40% of pre-COVID-19 levels. Nevertheless, the transaction rate or strike rate improved substantially. Developers admitted that the conversion rate of 3-4 buyers committing to sales from 100-odd leads and site visits, improved to the same number of buyers out of only 40-odd leads and site visits, post-pandemic. This development also helped to lower the marketing and manpower costs, at a time when the focus was on avoiding open-house invitations.
Even property brokers, who were having a hard time differentiating between serious and non-serious buyers, were surprised with the improved quality of leads in the business. One logical reason for this, could be the fact that digital engagement had increased substantially and only serious buyers were coming forward for site visits, while the non-serious property seekers preferred to stay at home.
Why customer conversions in real estate have improved?
Subhankar Mitra, managing director – advisory services, at Colliers International India, believes there are several drivers for this early turnaround and higher sales conversion, pent-up demand being one major reason. Some buyers realised that work-from-home was here to stay and this prompted them to hasten their purchase. Home loan rates are now at an all-time low. The top five banks of India are offering home loans between 6.9% and 8.5%, to both, the salaried and self-employed persons. This coupled with the interest subsidy under the Pradhan Mantri Awas Yojana (PMAY), can bring the effective interest rate below 5%, which is marginally higher than residential rental yield of 3%-4%.
“For certain types of properties, the rental earnings can pay for the interest part of the loan, which was not possible even a year before. In addition, some state governments provided discounts on stamp duty and registration charges. In many cases, the builders too bore a small percentage and made a ‘lump-sum, all-inclusive offer’ to the buyers, which was received well. The festive season also contributed to the momentum. Many developers reported that even the millennials buyers, who were missing in recent times, were back,” believes Mitra.
Is this a good time to invest in property?
JC Sharma, MD and VC of Sobha Ltd, is of the opinion that while the pandemic has kept us indoors, there are a lot of people who have realised the need and importance of owning a home of their own. The trend of working from home and the influx of NRIs investing in India, to buy properties to settle down in their homeland or as a future investment, have also made way for serious buyers. This realisation of the importance of owning one’s own home, coupled with the lucrative deals offered by builders, have also helped. “Smarter, cost-effective ways of reaching out to our audience digitally have been the core strategy behind reducing overall marketing cost. By focusing on selling the right products at the right price points, a large number of our deals have fructified due to referrals and word-of-mouth selling and repeat customers,” says Sharma.
What type of properties are buyers seeking, post-COVID-19?
Amit Modi, director of ABA Corp, maintains that the higher client conversion can surely be attributed to multiple factors. At the start of the pandemic, there was no clarity, in terms of the way forward. Fortunately, the world now has learnt to live with the pandemic and the initial churning, in terms of job losses and furloughs, have reduced and to some extent, there has been hiring as well. Home buyers are in a much better position now, to take a call on high value transactions like real estate.
“Other factors also include heavy corrections in prices, lowering of home loan interest rates, etc., which have encouraged fence-sitters to take the plunge. The buyer is now spoilt for choice and at the same time choosy, as well. Hence, there is greater demand for ready-to-move-in properties, feature rich housing or anything else that gives the satisfaction of value for money and security to the home buyer,” says Modi.
The spending towards marketing and promotions in real estate, largely dried up after the pandemic. Usually, marketing costs are between 4% and 6% of the product price. When the corresponding sales volume grows by 2%0-30% with reduced marketing cost, then, incremental savings is about 1%-2% of the top line. There has been more emphasis on digital marketing and social media where the cost is lesser and often directly proportionate to the sales volume. In the final cost and benefit analysis, developers are in an advantageous position, with better quality of leads, lower cost of conversion and higher conversion rates.