The pandemic hastened long-term trends: Sudhir Pai
The Magicbricks Realty Services CEO capitalised on demand for video tours of properties, without taking his eye off the core business.
Sudhir Pai, CEO of Magicbricks Realty Services, says the real estate industry calls for a thick hide. After six years of regulatory disruptions, he recounts the lessons from navigating the pandemic.
What has the year meant for you, given the difficulties in the realty sector?
The way the market has played out in the second wave is no different from how it played out last year during the lockdown. Except, it has been a more benign from a business point of view.
On the business front, it has been better now than last year. Last year during the lockdown, in the four- or five-week period when things were closed, the immediate reaction was traffic on the website fell by 50 or 60 percent. This year, it has fallen by 30 or 35 percent during the lockdown.
Last year, revenues froze. New orders froze by 80 or 90 percent. This year, it has been around 50 percent. The reason why things have been a little better than last year’s lockdown is because the uncertainty is less.
So, while the market realises that it is going to be a tough phase, things will look up for the business or economy once this wave subsides. From that perspective, it has been a lot better now.
The real estate sector signals how the economy is doing. In that context, you have a ringside view of all the builders and brokers communities. What have the implications been for them?
Let’s first see what is happening right now during the lockdown. On the builder and broker fronts, the patterns are like last year. When lockdowns happen, we find that the broker market is a lot more resilient as compared to the builder segment.
The reason for that is that builders are typically campaign driven. When lockdowns happen, they tend to defer their campaigns. As a result, they go into a shell.
In contrast, brokers look at their business more like subscriptions. So even when lockdowns happen, they work on their customers, building pipelines for the future. So, that market is more resilient.
On the longer term, it was evident even before COVID-19 happened. If you look at the industry since 2014, it has been seven long years. The industry has taken a hard knock. But many of the factors that were plaguing the industry in this period have subsided.
The numbers of unsold stock have been coming down. Homes that were not delivered are getting delivered. Interest rates are very low. If you look at prices of real estate, that has been stable. Houses are still available at 2015 prices, whereas incomes have gone up. The price-to-income ratios are looking favourable. So, a lot of the macro factors are coming together.
Pre-COVID, we were anticipating that the real estate cycle was set to turn for the better. And that the next five years for the industry should be a lot better than the past seven years. We still stand by that assessment. Once this COVID-19 wave subsides, the industry will have a decent run for the next five years.
Builders say there is a demand for better homes because of the reality of Work From Home (WFH). Are you seeing that trend?
There is a trend for wanting homes that are bigger in size. But we are not seeing people willing to spend more on those homes.
The way people are economising is to search for homes in peripheral areas, where prices are lower. You get a bigger home for the same price. We are also seeing traction in tier-2 and tier-3 markets, more action in residential plots compared with commercial property. Some of these trends will play out this year as well.
There is a trend towards bigger homes after what WFH has brought on. But it is not necessarily people shelling out more.
How have you responded to the COVID-19 crisis as a leader? And what is Magicbricks doing now in the new context?
In the first two weeks of April this year, we had over 50 colleagues who tested positive. This wave was going to be a lot nastier than last year. So we had a three-pronged action plan.
The first was to ensure that the number of new infections fell, so we strictly enforced WFH, including for our sales teams and call centre operations. We prioritised employee well-being at the cost of business disruptions and losing business.
Leaders got into huddles with their team members, advising them about SOP (standard operating procedures) and protocols to ensure that they are safe and keep their families safe.
The second priority was to take care of people who had already tested positive. We quickly put interventions of access to doctor consultations, home isolation kits, home testing, and wellness sessions. We put up a whole set of things to help people who had tested positive to help them get back on their feet soon.
The third priority was the set of folks who needed more medical attention. Some of them needed hospitalisation. It was a crisis. What really helped was we created an employee task force. We had more than 50 volunteers from our staff who did a remarkable job in helping 60 staff members find beds, oxygen cylinders, medicines and all of that in the three or four weeks when the crisis broke out.
What have you done as CEO for Magicbricks to adapt to the new normal?
We have developed a thick crocodile skin to deal with crises because the real estate industry has been in this mode for five or six years now.
In 2015, there was insane and irrational competition from online competitors. The next year had demonetisation, then we had RERA—the Real Estate (Regulation and Development) Act, 2016—followed by the GST (goods and services tax), and amendments to the Benami Property Transactions Act.
As an industry, we have been moving from one crisis to another because of external factors. Despite that, we grew at a healthy clip. As the cycle turns for the better, we are looking forward to doing better. There are two large things at play at Magicbricks.
When there is uncertainty and disruption, it is the core business that really needs to be strengthened. So, we have done a fair bit of back-to-basics kind of work: focusing on scale, listing acquisition, traffic, curation and quality on the website.
Secondly, there is another part of the organisation that we have created, which works on new engines of growth for the future. We have launched a bunch of property services, from pay rent using credit card to home loans, in the past year or so. These will drive growth in the future.
How are you making your organisation more relevant in the age of digitisation, which has become necessary after the lockdowns?
The whole company is a digital company, where we are invested heavily on the product and tech front. Whenever there is a disruption like this, people flock to the safety of familiarity. And companies that are strong and in a position of market leadership tend to do better.
Long-term trends get accelerated during such disruptions. In real estate, things had been moving from offline to online. About half of the industry was expected to move online by 2024. With the pandemic and recent disruptions, what was expected in 2024 is playing out in this financial year itself.
We have done a bunch of things. Some of the things that were happening on the ground will now shift to digital experiences a lot more and lot faster than what would have happened otherwise. It is hard for people to go out. In normal times, people made physical site visits after browsing our website.
The physical visit is a big part of what real estate is about. Today, a sizeable number of consumers make video tours. Our product suite has enabled that, and we are finding good adoption.
Plus, digitising some of the pieces in real estate that were manual and touch-heavy—those things are happening at a faster pace.
How are you leveraging partnerships to grow in the market?
In home loans, we have a tie up with over 15 banks. We will take that even further. For property services, we have three different models: some services that we render ourselves, those that we render through partners, and then the marketplace models for consumers to choose third party services. Several of these partnerships exist in the home décor space, and furniture rentals
At the end of the day, real estate is a high involvement purchase, probably one of the two or three big decisions people take in their lifetime. That leads to a whole set of services that people end up buying. We won’t be able to do all of it ourselves. So, we will look at partners and alliances to step into these areas.
What is the one thing Magicbricks has done that has made it a big brand?
The brand has to stand as a helping hand for consumers when they are buying a home. It is an infrequent purchase, maybe two or three transactions in their lifetime. And there is anxiety because a lot could go wrong. So, one of the expectations in this category is how much can we assist consumers?
We try and do that with information, research that we provide them, and so on. To be a warm brand that helps and enables consumers to make much better decisions.
And the one lesson from the past year?
I’d say team spirit. It was incredible the way the COVID-19 employee task force made things work. Team spirit is one of the values in Magicbricks, but this was team spirit in action.
Somebody from the product team helping somebody from sales. People really worked as one. This virus also taught us one thing that it doesn’t care for hierarchy and who you are, but treats everyone the same way. People at Magicbricks responded as one, which stood out for me.
Edited by Kunal Talgeri