The Indian economy is in bad shape; the real estate sector, in worse.
And yet one of the most audacious coups to have been pulled off in this challenging state of things has ironically come from the relatively anonymous Pune realty player, Kolte Patil Developers Limited (KPDL). KPDL’s Nestfest event in February is a lesson for all of us sages who feel that the best thing to do is to duck and let the slowdown storm blow over before we can emerge from our hibernating holes with a smug “I told you!”.
At this event, KPDL showcased its 13 Pune properties. No more, no less. There are some good arguments why this event should have been a non-starter.
- One, the real estate market was sluggish; the mere aggregation of properties into an event was merely old wine in new bottle that buyers would have soon seen through.
- Two, KPDL intended to market these properties at a premium to their prevailing prices; as soon as this became evident, the show would be over.
- Three, the general assumption was that KPDL would sell what it normally sold in a month plus 30 per cent, which would have scarcely covered the significant event cost.
- Four, KPDL intended to conduct mini Nestfests across the country and Maharashtra before the caravan rolled into Pune. A number hinted that it would be arrogant to think that the rest of the country was waiting to invest in Pune.
So, why did KPDL risk its precious resources on this needless event?
Because KPDL promised the booking of apartments against a mere five per cent down payment (normal 15 per cent). Because KPDL arranged for mortgage companies to finance buyers saving them marketing costs (a part of which was rolled back to KPDL). Because KPDL arranged with insurance companies to provide Home and Accidental cover. Because KPDL, which normally markets 40 per cent of its properties through brokers, could get a shot at selling direct and saving commission. If all these factors went right, KPDL would break even. If they went very right, KPDL would cover costs.
What transpired is the stuff that business schools should send their aspiring graduates to write case studies about. KPDL generated a walk-in crowd of 30,000 across the three-day event. The company launched six projects during the event, saving promotion costs. The entire Grade A Pune market generates an off take of 750 apartments each quarter; the Nestfest event generated sales of 1,156 KPDL apartments worth Rs 760 crore. KPDL generated an average realisation that was seven per cent higher than the prevailing average realisation. Nearly a third of the off-take was generated from outside Pune. The result is that Kolte Patil reported an off-take of nearly three million sq ft in 2014-15, its closest Pune competitor reportedly achieving only a third. The three million sq ft off-take benchmark now graduates this local player into national ranking.
Author: Mudar Pathreya – is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed.
Credits Business Standard