Today any investment idea must obey the commandment of entry. This commandment was coined by American entrepreneur MJ DeMarco.
It states that as entry barriers to any business road fall or lessen, the effectiveness declines while competition strengthens. If anyone can start a business easily, in a week or so, they are likely violating the commandment of entry and perilous odds lie ahead.
However, if you violate the commandment of entry, be exceptional. Venturing into real estate today is one of those businesses that break the commandment of entry and will require one to be exceptional.
I mean, there is no regulation to be a developer. Anyone can wake up tomorrow, register a company online and call themselves a real estate developer. They then get some house renders online, put them on a brochure and call themselves an astute developer. This ease of entry today has created, perhaps, the greatest threat to real estate investment – commoditisation.
When the difference between a product and another is just price, it has been commoditised. The real estate sector is flooded with commoditised projects – projects conceived in bar and chama talks. We have converted real estate projects to be like cooking gas – homogeneous. The only fight right now, it seems, is to be the cheapest.
Most real estate projects have disregarded market needs. Houses have become copy paste of each other, leading to commoditisation where the soul is sold to the buyer who wants the cheapest price. We have meticulously created low-price buyers fixated with nothing other than price.
The first thing most buyers hurry to look at is price because real estate developments look the same. In most circumstances, the reason behind a development being empty after completion or stalling or being auctioned have nothing to do with the market. Commoditisation of real estate is the real cause of woes for developers.
They deliberately refused to be exceptional with their projects and ended up with the ‘me-too’ developments flooding the market.
I have interacted with numerous developers and the common denominator is their palpable carelessness with project conceptions. There is nothing like ‘I have heard’ in real estate, this is a game of numbers and research. And if truly you have ‘heard’ about a certain idea, trust me, you’re not the only one with ears.
Let me discount your fears of a real estate bubble; there is none coming, not even a sign on the horizon. Commoditisation of real estate has clouded our eyes to believe there is something wrong with the market – there is none.
This is still the go to industry with excellent returns. The market is available for everyone and the only way to thrive is to be exceptional and follow the rules. And it’s pretty simple to do so; pay ruthless attention to the market needs.
There is an old saying, “In a gold rush, don’t dig for gold, sell the shovels.” Commoditisation of real estate projects is the emblem of pain and suffering for majority of our developers today. Flee from it!
The writer is a construction and real estate expert