PropTech in India 2020/21 - Money talks, pilot projects and transformation enablers
Updated: Oct 28, 2020
With PropTech in India, the agile thinkers - RMZ, Embassy, Brigade, Lodha, DLF, K Raheja - went off as the starters’ gun sounded, but the majority were still limbering up long after the gunsmoke dissipated; analogue-runners in a digital race.
In other words, we’re still at the start of digital transformation in the real estate sector in India; where money talks. In this piece I discuss the evolution of property companies, the receptiveness to change and the outcomes to look for in pilot projects.
Digital transformation in India is fairly new in most industries, and in real estate it’s nascent. For property companies (anywhere), the deployment of technology is - stripped back - primarily about achieving cost savings. And then later, it evolves to also be about providing additional value to drive rental income. The challenge in India is that there have been very few points of proof. PropTech is still a buzzword, a hashtag, a conference theme.
“The industry has yet to prove itself,” says Siddhartha Chatterjee, Honeywell’s Connected Buildings leader. “That makes a lot of business owners skeptical”. In our recent conversation, I asked Siddhartha how we move past that skepticism. “In the UK or the US they started this journey a few years back, which allows us to show our customers in India that there are many case studies to exhibit how digital transformation has brought about significant returns,” Siddhartha says. “We need to go on that journey.”
Comfort in tech
At the risk of oversimplifying, that journey starts at home. The willingness to consider tech adoption in business goes hand in hand with comfort in technology in everyday life. Let’s take, for example, taking data to the cloud.
“A couple of years back, a conversation about taking data to the cloud and managing it from an app got killed in the first meeting,” says Siddhartha. “Because only a small percentage of the population were using apps in their daily lives.“ Today, as Siddhartha observes, everybody uses apps.
And it’s that base increase in comfort level that leads to a greater receptiveness of PropTech, especially by those in the key operational roles. That head of facilities, who may have been a late adopter, is now more open to change. The idea of being’ tech-enabled’ has been normalized.
I asked Siddhartha if the people in key positions on the other side of the table were changing too.
“Yes, over the last two years we’ve seen a niche transition happening. New roles have been created at property companies: digital transformation specialist, change management leader, CDO.”
It’s true that a lot of the technology evaluation is being driven through those roles; whom Siddhartha describes as “the coach in the system”, though I suspect you could still throw a blanket over the heads of digital transformation in Indian real estate.
As we know, in India, first generation business owners are still very often involved in big decisions, though now in many cases the second generation leader has taken up the innovation mantle on the company’s behalf (Nirupa Shankar at Brigade arguably being the biggest proponent of PropTech from that particular group of leaders, but also Sid Menda and Karan Virwani, amongst others).
The picture that’s emerging is a small but growing number of digital transformation champions, composed of second generation leaders and transformation specialists. Added to the backdrop of an increased general comfort in tech amongst operational heads, it begs the question; what’s holding us back?
Points of proof
As touched upon earlier, one of the inhibitors has been the lack of points of evidence of cost savings, simply due to the infancy of the PropTech industry in India. Although the path to entry could be through a newly-appointed digital transformation specialist, the final business case will get evaluated in front of the CFO and business owner. “It’s tangible pathways to cost savings that get discussed in the boardroom,” Siddhartha says.
Early adopters often start small. Indeed, Siddhartha encourages his customers to prove it on a small scale, and then cautiously expand. I asked him what “starting small” meant in the context of Honeywell’s Connected Buildings.
“A three month pilot with two buildings is the sweet spot for customers. It gives them the validation of the use cases that digital transformation and IoT can bring in,” Siddhartha says. I question whether three months is long enough. “Even though three months is a short time to derive savings, the critical thing is that we jointly agree on a template of where the cost savings will come over the next 12 and 24 months,” he says.
As Siddhartha alludes, pilot projects are about more than demonstrating cost savings. A large part is about bringing people on the journey. For the use case of predictive maintenance, for example, Honeywell is proposing to rework how buildings have been managed for the last 30 years. The system isn’t relying on humans to make decisions; that’s a huge change management project. “Anywhere we deploy, there is a customer success team,” Siddhartha explains. “They take over the process of helping the customers get comfortable with the systems. It’s the most critical part of the pilot; helping the customer get returns.”
Large, diverse portfolios
Siddhartha also talks of the tangibles and the intangibles. For now, it’s three overarching tangibles that dominate the client conversation: reducing energy consumption, creating manpower productivity improvement, and easier and smoother administration. “We can help people run portfolios with lesser man power through autonomous, digitized buildings,” Siddhartha says. “That’s an attractive tangible outcome that commands attention at boardroom level.”
Honeywell has had good traction with the early-adopting property companies with large, diverse portfolios, Siddhartha explains. “In managing such a large, diverse portfolio with equipment from many different suppliers, some running off 2005 systems, it can become very inefficient. We bring in a uniformity that makes that diverse portfolio of buildings easier to run.”
I ask Siddhartha about how the system works. “The beauty of our Energy Optimization software is that it doesn’t require anything special in your building. It sits on top of the existing building management system, irrespective of manufacturer. It’s an AI-based algorithm that feeds in your building’s data - things like occupancy patterns and people flow, weather forecast patterns - the more data you can feed it, the smarter it becomes. It takes over the BM system and starts running it smarter, giving you savings. We don’t need anything else. Just plug in the gateway, give it a runtime of 10-15 days to take in the data and create a learning pattern”.
The savings are mainly from HVAC, I suggest. “Yes, you’ve got to understand that HVAC is the major gusler of energy in the building,” Siddhartha says. “Just putting that software on top, we are able to bring down the energy costs by 10%*”.
Siddartha's experience speaks to the idea that it’s cost savings that are driving PropTech decision-making in India. The likelihood is the market will evolve to take in some of the less immediately tangible benefits; especially around occupier experience - air flow, healthy building visibility, employee satisfaction. For now, these are the ‘icing on the cake’ rather than the cake itself. After a pilot project, those less tangible elements can become very attractive - they’re just not necessarily what sells it upfront
Tenants will drive technology adoption
The shift we saw in the US and UK markets over the last couple of years has been from property companies deploying technology to achieve operational cost savings (like in India is beginning now) to demand-driven implementation.
Over time, tenant, customers and user expectations of landlords change, especially in the era of ‘real estate as a service’. I’d expect to see that shift play out in India too, which is a huge opportunity for the market. Siddhartha agrees; “There is a contingent of large, diverse portfolio owners who have been playing it safe, waiting to see what happens from the first wave of early adopters.”
Perhaps then 2021 will be the year that the analogue-runners finally join the digital race.
* Based on findings from several Honeywell implementations of Energy Optimization at various customer sites over a 6-month timeline. Typical customers achieved between 10-20% savings, after 3 months of deploying Energy Optimization at a properly equipped building. Individual results may vary. Past performance is not indicative of future results and Honeywell does not guarantee energy savings.