Two Different India’s : A Socio – Economic Cocktail Affecting the Real Estate Sector

Segmenting the Residential Real Estate Market in India       

A vital segmentation in the real estate market revolves around the socio – economic structures existing in India today. Division of the population along these lines produces broad segments such as the High Net-worth Individuals (HNI), Affluent classes, Middle classes and the Economically Weaker Sections (EWS). There can be many further subdivisions to each of these segments but that would only narrow our field of vision and hence I have chosen to retain them at the broadest possible level. Another hard reality to be taken into account is the existing duality of a rapidly growing Urban India and a hardwired Rural Bharat. Though, through sustained effort the gap is gradually being narrowed, at present the chasm is still wide enough to create distinctly separate market segments, both requiring divergent approaches by real estate players.

A Diverse Urban India

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courtesy – google pics

Based on the wide disparity in infrastructure, micro economics and quality of life available, there is a clear distinction between urban areas in India. Thus urban areas can be generally classified into the highly progressive and affluent Tier I cities which are seeing fast paced development in line with global standards and the Tier II / III areas which have been relatively recently exposed to the effects of globalization and are endeavoring to play catch up. The socio – economic classes are the same in both types of urban areas but nature of demand differs between them in terms of the ticket size and the type of housing desired. This is primarily due to higher costs in Tier I cities and different mindsets in Tier II/III towns. Also superior economic opportunities in Tier I cities leads to greater purchasing power of various socio-economic classes living in them vis a vis Tier II/III cities and towns. Real estate players need to factor in these differences and capitalize on them to develop viable products of the optimum ticket size for offering to each specific customer segments. For ease of understanding I have tabulated the same for Urban India as given below.

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A Highly Pragmatic Bharat

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courtesy – google pics

Rural India is far more hardwired, pragmatic and closely linked to societal values and realities of Indian culture vis a vis the globalized urban India. Rural mindsets are still relatively rigid and development still means hoping for essential infrastructure reaching the small towns/villages and then remaining functional upon establishment. Concept of development of residential real estate is still largely restricted to small plotted colonies for the EWS whereas the rest of the classes still prefer to build independent houses on self owned lands or renovation of their ancestral properties. It is not rocket science to realize that there is still a long way to go for any meaningful residential real estate development in rural India. For the present economic inclusion , social & technological upliftment, industrialization and ensuring establishment of basic infrastructure are the vital pressing needs of the hour. Once again for a better understanding I have tabulated the parameters pertaining to Rural India below.

r_n

Key Takeaways from the Two India’s

Whereas in Urban India the gender divide is considerably reduced as seen by the participative and influential involvement of women in the decision making process, the rural areas are still driven solely by the male patriarchal system. In addition the needs of Rural India are different from Urban India, for example the residential expectations of affluent land owners in rural India are very different from the affluent segments of urban India. Likewise the purchasing power in the two different India’s also contrast sharply. As real estate professionals it is important to understand that irrespective of all our given financial / economic / administrative or extraneous constraints, generic products or ‘one size fits all’, cannot and will not succeed. If the realty sector is to revive and grow , products need to be designed keeping in mind the subtle and not so subtle differences of each specific target segment, both in Urban and Rural India, within the context of our vibrant and thriving socio – economic mix.

View previous Articles on the Subject

Realigning Strategy for Residential real Estate in India

https://concretereanalytics.wordpress.com/2016/09/27/realigning-strategy-for-residential-real-estate-in-india/

Decoding the DNA of Residential Real Estate

https://concretereanalytics.wordpress.com/2016/10/09/decoding-the-dna-of-residential-real-estate/

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