Tuesday, June 17, 2008

Online Media - Solution to Crude Oil Price Rise and Real Estate Market in India?

You must be hearing that the crude oil prices worldwide have been rising and it has led to inflation in a lot of economies. Can “Internet” and “Online Media” become a small stepping stone solution to abate the rising Crude Oil and Real Estate prices?

The continuous rise in Crude oil prices worldwide is posing inflationary effects in emerging as well as developed economies. We all understand that Crude oil is a resource which will diminish one day. So the environmentalist, the energy honchos, corporate and governments worldwide are trying to find out solutions to reduce crude oil usage and trying to develop parallel sources of energy like: Bio-Fuel, Nuclear Energy, Water, Wind etc. I am hereby explaining the affect on Real Estate industry in India and how they can recuperate from the same.

What’s the Present Real Estate Industry’s situation in India?
The recent bloodbath in the real estate sector has started taking a toll. Almost all large developers are now facing a severe cash crunch and finding it difficult to complete their ongoing projects. In fact, the situation is so bad that most of them have reported a 50-70% cash shortfall. Industry sources say that the liquidity crunch has forced many developers to pick up cash from the unorganized market at interest rates as high as 35% to 50% annually. The lending rate of banks is between 18% and 20%. The grade A developers which are facing crash crunch include DLF, MGF Emaar, Shobha Developers, Unitech, Omaxe, Parsvnath Developers, Hiranandani Group, Ansal API, BPTP Developers and TDI Group. As a result of the crash crunch many developers have started going slow or even stopped construction of projects which are either in their initial stages of development or which would not affect their bottom line in the near future.

Why it happened?
There are multiple factors (explained in my previous entry) which have led to this situation which can be like:
-Rising Crude Oil Prices
-Inflated Cement and Steel prices
-Recession in US
-Increasing inflation
-Over-hyped prices of properties (for higher gross margins)
-Overspending on Marketing by these developers (tradeshows, marketing collaterals, TV ads, billboards, hoardings etc).

All these reasons put together led to the increasing real estate prices and here we are with cash crunch amongst real estate developers.

What’s the Solution?
Obviously, if people start buying more houses, the real estate developers get more cash. If people start using lesser oil, the consumption will go down and subside the demand and help in reduction of prices. However, with the inflation mounting the cash in hand is reducing for the common man and impacting the purchase cycles of the buyers and sellers. I can’t suggest what can be “ONE” solution to this country wide problem. However, here is one solution which I can think of, and can be helpful from a perspective of a “techno-marketing” professional.

Presently in India the consumption of fuel follows a pattern like this:

· Transport (Petrol, Diesel, CNG, Aviation Fuel) : 51%
· Industry (Petrol, Diesel, Fuel Oil, Naphtha, Natural Gas): 14%
· Commercial & Others : 13%
· Domestic (LPG & Kerosene): 18%
· Agriculture (Diesel): 4%

These numbers clearly show that Automotive Industry is definitely a majority fuel consumer. So if we can help reduce a small amount of automotive fuel consumption, we are surely headed to ease the pressure.

Solution: Leverage the Online Media.

Benefits of using Online Media in solving various issues:
Lower energy requirements.
-Work from home.
-Instead of people traveling for so many meetings all across the city, you can have web conferences and reduce your travel time and cost of traveling. You are saving time, money, oil and gas. Eg: www.webex.com
-You will be more productive while you are meeting people online and you would be able to do more in lesser time.
-Set-up Web cams in your construction sites to show the present construction status.
-Give maps of everything online to help people see the location of your site and many more similar things.
-Less print promotions, lesser expenditures and more ROI
-Lesser marketing expenditures.
-You can do online exhibitions and tradefairs eg: www.unisfair.com
-Spend less on marketing by doing away with billboard, TV and other sort of ridiculous expenses.

Spend money in promoting your websites and driving people to go Online and save money. Lesser use of energy sources which will get depleted one day. More usage of technology which can drive businesses and reduce dependency on oil based energy.

Though I am proposing something which is far fetched, however, things like these take a definite time span to get implemented and early adopters reap the benefits of Brand leadership and differentiate themselves from their competitors.

Also, this is just one small solution which can go a long way in helping to reduce energy requirements and may help the inflationary pressures, public discretion can never be discounted for!

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