market segment and consumer preference analysis for

Marketing Research 2014

IIM KOZHIKODE- EPGP06

Market segment and Consumer Preference analysis

for Affordable and Mid-Range Housing

PROFESSOR: Prof. Joshy Joseph, IIMK

COMPILED BY: Ravindran Devarajan (EPGP-06-122)

Vinay Vernekar (EPGP-06-151)

Balagopal Venugopal (EPGP-06-163)

Pala Anajaneyulu (EPGP-06-110)

Prashant H V (EPGP-06-116)

Saravana Kumar (EPGP-06-132)

V Nagaraj (EPGP-06-147)

Hari Prasad Jonna (EPGP-06-096)

Vineeth Purushothaman (EPGP-06-153)



Table of Contents 1. EXECUTIVE SUMMARY....................................................................................................................... 3

2. PROBLEM DEFINITION AND OBJECTIVE OF RESEARCH ............................................................ 3

2.1. Exploratory Research: ........................................................................................................................ 3

2.2. Management Decision Problem: ........................................................................................................ 4

2.3. Marketing Research Problem: ............................................................................................................ 4

3. THE REAL ESTATE LANDSCAPE ....................................................................................................... 6

3.1. Environmental Context (Secondary Data Analysis): ......................................................................... 6

3.2. Environmental Context (Internal Data analysis) ................................................................................ 9

3.3. Industry and Regional Context ........................................................................................................ 10

3.4. Competitor Analysis ........................................................................................................................ 11

4. APPROACH TO THE PROBLEM AND RESEARCH DESIGN ......................................................... 12

4.1. Analytical Model: ............................................................................................................................ 12

4.2. Plan and Methodology ..................................................................................................................... 12

5. DATA COLLECTION AND ANALYSIS ............................................................................................. 13

5.1. Data Collection: ............................................................................................................................... 13

6. REPORTING .......................................................................................................................................... 13

7. APPENDICES & REFERENCES .......................................................................................................... 13



1. EXECUTIVE SUMMARY

The real-estate sector in India has seen an enormous growth in the last few years and the growth is

expected to remain in the coming years. At the same time there are a large number of real-estate

developers ranging from mid-size to large corporate houses in the market making the market very

competitive. It becomes a key for the real-estate developers to target the correct segment

understanding the consumer preferences.

The objective of this project is to identify one segment of supplier in this case a mid-range developer

(Developer who supplies in the segment of 20Lakhs – 75Lakhs) and determine the management

problems which in turn will focus our analysis towards this target segment group. Our intention is to

identify the management decision issue which the mid-range developers are facing by focusing on a

particular developer and analyze the market and customer preference.

For our analysis we have cardinally categorized the housing segments as (1) Budget housing

(20Lakhs – 35Lakhs), (2) Affordable housing (35Lakhs -50 lakhs) and (3) Mid-range housing

(50Lakhs -75 lakhs)

This project was started identifying a mid-size developer M/s Prithvi Homes and problem

confronting the specific developer, however this analysis and report should be applicable for all mid-

size developers who would be interested in the above housing segments mainly in urban metros like

Bangalore or Hyderabad

2. PROBLEM DEFINITION AND OBJECTIVE OF RESEARCH

2.1. Exploratory Research:

M/s. Prithvi Homes and Sri Chowdeshwari Builders & Developers is located in South Bangalore in

Gottigere. It is into construction and marketing of apartments under the projects banner of Thirumala.

Details about the projects can be found at http://prithvihomes.com/

Interview with Managing Director (Decision Maker) Mr. D.V. Raghu was conducted to identify the

management problem currently experienced by the company.



Currently the company mainly is involved in mainly affordable (35 – 50 lakhs) and mid-range (50 –

75 lakhs) flats but also launches budget housing (20Lakhs – 35Lakhs). The competition has increased

a lot with many new real estate companies entering in the heated Bangalore housing market.

Also since the 2008 recession housing markets have seen with more cautious growth. Hence

currently management is not able to clearly able to judge the overall market demand and available

supply for launching new projects. Also management views that currently there are both quality and

non-quality builders available in these segments and M/s Prithvi Homes being core strength of

quality is not able to position Quality standards to the customer in the segment.

There is also issue of customer taking too much time and confused with lot of options which prolong

the decision making in between lot of real estate projects.

Due to this issue Management is not sure on the launching new projects and hence wants to slow

down the launches unless clear demand supply is foreseen and there exist a clear customer segment

and potential for specific market segment.

2.2. Management Decision Problem:

Based upon the interview with decision maker here are the decision problems encountered by mid-

size developers such as Prithvi Homes

1. Should mid-size developer continue with their current pace and launch new projects with

affordable (35 – 50 lakhs) segment and mid-range (50 – 75 lakhs) segment? Or should they

slowdown in this segment?

2. Is there specific customers groups who are looking for this segments and what are the

customer preferences for this segments so that specific customers can be targeted with

preferred amenities

2.3. Marketing Research Problem:

For the above management decision problem the marketing research problem is formulated as below:

A) Market Analysis: To determine if there is sufficient demand for affordable (35-50 lakhs)

and mid-range flats (50 - 75 lakhs) segments so that mid-size developers can compete with

big developers and provide housing with same amenities as provided by big developers but

with competitive pricing. The research should provide information to the following specific

questions:

1) Is there oversupply for the demand which is existing in the segments

2) Which segment, location and Type of building has less competition and good growth

B) Customer Analysis: To analyze the customer pattern in preference for specific market

segment and to analyze the preferences which is used in deciding a project. Also analyze

various personality traits of individuals and how it is exhibited in the decision process and

time to finalize a particular project. The research should provide information to the following

broad questions:



1) What are the customer groups e.g. mid-income consumers (5-6 years in private firms,

government employees, and small business owners) which exhibit similar pattern in

decisions process for a particular market segment?

2) What criteria’s like location , good approach, connectivity, infrastructure like school,

hospital, shopping complex and distance to city limit which consumers use when

choosing a affordable or mid-range flat?

3) Are mid-income consumers inclined to big builders even if it means paying a premium of

at least 10 lakhs for the same quality?

4) Are consumers aware of and place importance to quality construction, zero deviations

from approvals, occupancy certificates and how important is that in their decision

making.

5) Is there a pattern of customer traits (psychographic) including mental accounting which

exist in deciding a particular project?

6)



3. THE REAL ESTATE LANDSCAPE

3.1. Environmental Context (Secondary Data Analysis):

Overall the macroeconomics seems to

be stabilizing post 2008 recession

with GDP around ~5% in India and

Currency rate stabilizing.

Though macros economics stabilizing,

we see an increase in trend of people

constrained by financial and market

condition.

Effect of overall market decrease is

felt in 2009 post 2008 recession.

Trend in both 2 BHK and 3 BHK

increases while Villa houses was seen

increasing in 2011 due to stable

economic environment and increased

purchasing parity

Though we have seen price increase

with new launches in Q3 20011, the

price of absorbed units was not

impacted with price increase. Hence

price elasticity is low.

Though we see regional variation in

price trends overall the price trend

exhibits the overall price trend in all

the regions. But regional variation can

be drastically seen during stabilized

and heated up market.



Prices in east seem to be exhibiting

the overall trend with the very little

regional variation. This implies that

the regional locations act as substitute

for nearby location.

We see bullish sentiments both

positively and negatively exhibited for

central region whereas other regions

exhibiting even sentiments. But this

sentiment is not seen in the housing

consumption. Possibility may the

sentiments are reflected in land rather

than housing market.

Though the regional attractive index

variation in Whitefield and Sarjapur is

seen not much of consumption

difference is seen. Hence consumption

also depends on specific project

parameters. Hence preference analysis

to done specific to project parameters.



Overall the trend in housing

sentiments is reflection of financial

market trend.

Surprisingly housing sentiments are

exhibited bullish by higher age group

except for Q1 14

As predicted the sentiments in

housing market is bullish and huge

variation with increase in income

group and stabilized with lower age

group

Fast buyers <6 months are more

constrained by personal and market

constraints. Hence immediately

selling required easy financial

resources enablement and launching

in good market scenarios.

We see sentiments down post-

recession in higher value properties



and increase in trend for 20 lakhs to

40 lakhs property.

3.2. Environmental Context (Internal Data analysis):

Internal data acquired from companies recently launched and ongoing project Thirumala Anemone.

Anemone Flat

Details.xls

Thiramala Green

Fields.xls

0

5

10

15

2 3 4

Booked

Not Booked

0

2

4

6

8

10

12

1534 1737 1755

Booked

Not Booked



3.3. Industry and Regional Context

Location Preference

Projects are launched more in the

increasing trend regions and overall

regional bias seen in housing

proportion

Product Mix

Survey results in 2010 and 2011

indicate clear increase in 2BHK

and 3BHK and increase in villas.

This indicate consumers of 4BHK

stretching to villas

Customer Income& Budget:

Even though monthly income is

equally distribute mental

accounting may be factor to tend

towards 20-75 lakhs properties

Customer Preferences:

Equal preference is exhibited for all

stages of property.



It is clearly seen that 56% of people

take >3 months for purchase of

property. Marketing needs to

aligned for this behavior

Customer Traits

Clear increase in traits exhibited

with middle income and higher

income members going for stretch.

Hence for Lower income group

price point is crucial. More trait

analysis to be carried out.

The Bangalore residential real estate as a commodity is booming at present. The real estate markets

have shown signs of growth during the last twelve months in the affordable and mid-segment

category. The property prices have had an average appreciation of about 7%-9% due to which

affordability and location plays a decisive role in the sale of 2BHK(800-900 sq. ft.) and

3BHK(1200-1300 sq ft.) to suit the clients requirement.

We do find that it is during pre-launch offers by prominent builders that they have received a good

response, with 50%of units launched being sold in some cases. We believe that the steadily growing

interest in pre-launches indicates the increasing long-term investor participation in the Bangalore real

estate market.

The Bangalore real estate market witnesses major development of premium products, which is

looking across to the high net-worth (HNW) segment, across micromarkets. We expect this segment

to remain slow and staggered, with a gradual build-up in inventory over the coming quarters. The

realty market is now a luxury bubble!

We have divided the area into five distinct zones: North, North-East Bangalore, East, South-East

Bangalore; South Bangalore; West, North-West Bangalore and Central Business District/Off Central

Business District, on the basis of location and real estate activity to analyze the key trends and which

would provide a outlook of the existing market scenario.

3.4. Competitor Analysis

One of the competitors of Prithvi homes in same price bracket is Shriram properties. This realtor is of

Rs 60 billion company having 40 years of history and delivered 8.36 million sq. ft. in south India.

Major realtors like Shriram are offering affordable homes starting from 28laks. This builder is

renowned as Quality Builder, Environment Compliance and Social compliance. With same price

bracket, they are providing high class amenities like Amphi theatre Senior citizen Park, Children

Park, club house, rain water harvesting, biodegradable dispose and etc.



In IT hub Bangalore, 82% software professionals are investing in real estate. They look for quality

builder, affordable price and amenities. The awareness in customers is high, now days. So they do lot

of study before choosing a builder

Another big competitor in value homes domain is Tata Housing Development Company (THDC)

since 1984. They are building homes for all classes of people range from 30laks to 14 crores. Below

is the comparative study of 3 competitors.

Pruthvi Shriram group Tata Housing Group

Turnover(Cr) --- 60,000 65,000

Area delivered(million Square Feet) --- 8.36 40

Affordable home approx cost 25-45 27-42 (Sameeksha, Bangalore)

30-45 (Tata Haven, Bangalore)

Competition for Prithvi is high considering major builders like Shriram & THDC. Through this

study, various approaches are suggested for Prithvi on competitive advantage.

4. APPROACH TO THE PROBLEM AND RESEARCH DESIGN

4.1. Analytical Model:

4.2. Plan and Methodology

Customer Survey & Analysis

Based on the secondary data analysis the factors which needs further inputs will be designed which

will be circulated to both existing customers of the real estate company and potential customers.

Survey is planned to conduct both physically and online.

Focus Group analysis

Focus group consisting of current and potential home owners around 8-9 members will be surveyed

for collecting and analyzing their decision process over time and the factors which have influenced

over a period of time. This will give the diagonal data analysis whether the decision process will be

changed for second home purchase or based on the macro environment change.



5. DATA COLLECTION AND ANALYSIS

5.1. Data Collection:

6. REPORTING

7. APPENDICES & REFERENCES

market segment and consumer preference analysis for

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