Good morning, across the world, core business sectors have been grappling for growth and fresh air for almost two years now.
The real estate and construction sector in India has been hoping and praying for growth since demonetisation happened. The 2019 non banks collapse watered down the first recovery phase. A year later, the Delta-Omicron tag team event happened, and then the Omicron setback as soon as the new year hit.
While us real estate folks are still licking our wounds, a darn war has broken out.
An event this drastic is sure to expose more holes in our all-is-well corporate stories. More financial irregularities will be unearthed, more ghost towns sanctioned and funded, and certainly, more jobs will be lost.
So what does Ukrained mean anyway? Just replace the country name in the word with a very versatile four letter word and say it aloud - we're Ukrained. Aren't we now.
😣 - That 52 week low feeling.
China's Healthiest Developer Is Unwell
Once known as China's healthiest real estate developer - fully compliant with Beijing's debt criteria - the Shimao Group has now taken the same path as Evergrande.
Zooming In
In 2021, all eyes were peeled on whether Evergrande was able to repay its debt, and how a failure on that front could affect China's economy on the whole.
But like other real estate developers, Shimao has since revealed its own address in the tower of debt - the penthouse.
Shimao Group Holdings reportedly defaulted in early January, plus the forecasts for its future income are all looking pretty bleak. Contracted sales for 2021 dropped by 10.4% YoY to 269.11 billion yuan (USD42 billion) and analysts expect sales to drop further over the next 2 years.
What Now?
Because the folks at Shimao wrote a lot of checks that their investors couldn't cash, Moody’s downgraded its rating on Shimao by two notches, to Caa1 from B2 — both in the “non-investment grade” category. Moody’s outlook on the developer is now negative, post the ratings review that began on Jan. 10.
Is There A Next Step To Resolve This?
Yes. To avoid a total meltdown of the real estate company, the auditors for Shimao’s mainland China subsidiary, Hopson Development Holdings, and China Aoyuan Group all resigned a couple of weeks back.
Fresh On The Wall
🎨 A recent survey found that average home prices in Dubai are expected to climb 7.5% this year and 5.5% next, compared to 5.0% each in an earlier survey conducted in November. But despite a sharp rise in prices, ample housing supply could ensure that Dubai remains a buyer's market for the next 2 years.
🎨 To ensure that RERA remains on track and the fruits of the RERA reaches the last homebuyer, it is necessary that the Central Advisory Council (CAC) meets more often and reviews the working and performance of RERA across India so that necessary and corrective action can be taken from time to time - homebuyers in a letter to MOHUA citing that in the last 6 years since RERA, there have been only 3 such meetings.
Weekend Conversation Starter
How Real Estate Tech Is Filling 4 Big Gaps
Without doubt, the pandemic has left a lasting effect on how we transact, use and manage real estate.
As the clouds clear, real estate tech can be seen filling certain big gaps already. Here are the top 4 that caught our eye:
↔ Going Contactless: While home sales have been first off the grid to adopt remote showing and presentation tech, hospitality and commercial real estate are adopting contactless and remote management tech rapidly. Tech is being deployed increasingly to manage properties, from access control such as biometrics and facial recognition hardware to software for remote check-in and management.
↔ Making Workflows Efficient: Real estate and construction are infamous for complex workflows, but real estate tech is helping the industry digitize and thereby drive down costs and speed up projects. On the finance side of construction, tech is now powering underwriting and origination of construction loans. This lets general contractors pay subcontractors faster, keeping project timelines intact.
↔ Investing For All: With interest rates at record lows and the stock market volatile, more are investing in property. With tech enabled services, individual investors can buy homes as investments, or they can buy fractional real estate through REITs. Such offerings were earlier only available to high-net-worth investors in real estate funds, but thanks to tech, investing is now open for everyone.
↔ Monetizing Properties: The pandemic has created house rich, cash poor and cash rich, house poor people. For the house rich, real estate tech, along with fintech, is opening up possibilities to sell fractional equity in the property to raise cash effortlessly. On the house poor side, tech is making the rent to own model available to the common homebuyer.
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This week, Amazon sued two ‘fake review brokers' for filling up the ecommerce marketplace with fake ‘verified’ reviews, all paid for by sellers on the platform.
Sellers would allegedly pay for the service hoping that it boosts their product in Amazon search results.
Moral: Not all paid stuff is great and not all free stuff is bad. For example, this daily email is free for life. 😍
See you at 7 AM on Monday morning. 💚
☕ The Crew@Ginger Chai