No doubt, the real estate market is bullish. But there are serious structural issues that need to be addressed if we expect the sector to continue its growth trajectory.
Firstly, let us categorize structural issues into two areas.
One is classified as regulatory issues, which refer to the inability of the government to curb local government unit (LGU) related interference, local and national level bureaucracy, corruption, informal settlers and the lack of political will to manage the perennial housing backlog that has ballooned to 7 million.
But I would like to focus on another form of structural dysfunction that is clearly developer-induced, appears to be nearing endemic levels, and has alarmingly spread across all asset classes (both vertical and horizontal developers).
From bad to worse
It is about customer service and post sales service. In my 32 years with the sector, I honestly believe that the service level across the property sector has gone from bad to worse.
It is rather unfortunate and tragic as the problems affecting homebuyers are predictable. Planning ahead, as well as creating a service infrastructure reinforced with service protocols and manned by excellently trained front liners, appeared to be the least of a developer’s priorities.
Customer service is in such a tragic state that unknowingly, a developer’s bottom line has been compromised. The desirable attrition rate of the property sector in advanced economies in Asia hovers within 8 percent to 12 percent with the exception of some countries like Mongolia where the spate of unfinished vertical developments has become the norm.
For one-off developers in Mongolia’s capital city, Ulaanbataar, they made constructing, and deliberately not completing the project, a cottage industry.
Unknowingly, developer neglect in hand holding homebuyers ends up with sales not pushing through. Poor service translates to buyer exasperation, frustration and for some, on the verge of hopelessness.
Homebuyers that are based overseas are the biggest losers. When frustration hits these buyers aggravated by the developer’s callous nature of addressing homebuyer concerns, it will just be a matter of time that an exodus of buyers discontinues the purchase.
With pressures mounting primarily because of online rants, we can expect buyers pulling the plug, foregoing reservation deposit and amortization.
What are the issues related to customer service?
After closing the deal and getting their fat commissions, sales agents virtually abandon the service process.
Sellers also leave their company so naturally, service to homebuyers abruptly ends
By default, developers look at customer service as an added cost center and dismally brushes it aside, despite appeals from the frontliners to invest on a more holistic and integrated service development process.
Generally, frontliners are poorly trained, ill-equipped, and compensated less to manage customer complaints. Naturally, attrition can be expected.
Further aggravating the situation is the limited number of frontline personnel managing customer service department.
Some managers consider customer service as a side dish and ignore incessant complaints. That passive mindset is a reflection of top management’s heartless and callous nature of focusing on the wrong priorities.
The mishandling of a service concern, aggravated by managers who are poorly trained to handle situations, may result in unsympathetic behavior on the part of the frontliners. The problems will eventually build up and you can almost predict back outs and attrition happening.
Attrition in real estate
Unofficial statistics and first-hand experience peg attrition rate in the industry at an average of 30 percent, meaning three out of 10 homebuyers would discontinue his or her purchase. Out of the three, at least one is not due to inability to continue the amortization but due to poor customer service.
This is the alarming state in the sector that must be addressed and resolved. Otherwise, this can compromise the whole sector when totally ignored.
I know of several national developers who had attrition rates as high as 60 percent, meaning six out of 10 buyers discontinue the purchase. These developers have clearly compromised their bottomlines, decided to move to a different asset class, or have been acquired by other players.
If you ask me, they deserve to exit in disgrace.
I also know of some property developers who completely ignore frontline concerns such that, every time sellers appeal for service intervention, the developer will simply deploy an outsourced legal team to fire fight customer related issues.
Engaging lawyers is as good as a kiss of death as the confrontation translates to an adversarial form of engaging customers.
Pushing for reforms
Why am I passionate in pushing for reforms from the developers’ side? For one, I have been in this industry for a good 32 years and counting. Next is that I had the opportunity to co-author a book on service as a strategic initiative. And lastly, I wish all developers will be client-driven and not cost-centric.
Presently, there remain thousands of hopeless buyers who are still suffering in silence. Up to this day, I have had my fair share of homebuyers appealing to me for intervention regarding their complaints.
For the skeptics and unbelievers, you can see voluminous court cases docketed in many trial courts in the country and various cases of unresolved homebuyer complaints in the Sala of HLURB legal officers.
In short, this is a serious structural defect that is predictable and can be resolved with proper planning.
Yet, developers completely ignore them. It is tragic.
This problem has plagued the industry for 20 years now, and any intervention is long overdue. It is 2019, and it is time. When the developer’s margins have been compromised due to a high attrition rate, perhaps this will compel them to act.
My advise is simple: invest in people development and capacity building, and reinforce it with Technology and ERP initiatives. That way, post sales customer service can move forward without any hitches.
The author is an executive director at W+B Advisory and program director for real estate at the Ateneo Graduate School of Business