How is Asset Monitoring Critical to Real Estate Investments?

Asset monitoring, as the name suggests, is the monitoring and management of tangible or intangible, non-financial assets. It is meant to rear the market value of the asset so that ownership is profitable and the portfolio can grow. An asset management firm streamlines real estate operations and ensures that the investment is not depreciated and the value for investment properties is maximised with minimal risks.

Buying of real estate is an investment strategy as real property can be bought, improved and resold or it can be rented out. Strategic planning and execution is required to reposition properties to increase income and reduce operation costs. Navigating the murky waters of the real estate market is a challenge which is best left to the experts. As preparing financial forecasts, supervising leasing activities, carrying out cash flow analysis and forecasts, and providing recommendations on acquisitions and dispositions is not everyone’s cup of tea. There is also the risk of damage and deterioration to the property which needs constant monitoring.

How has Asset Monitoring Changed?

Monitoring of assets has become easier as industries move from age-related maintenance schedules and visual inspections to new technologies. They are now investing in remote asset tracking and monitoring, predictive and preventive maintenance, and condition-based monitoring. The changing landscape introduces complexities in this volatile market for which risk management is vital. With the help of scenario analysis and stress testing, one can consider various new factors and react to changes quickly to uncover possible outcomes. To make informed decisions, continuous reviewing of asset strategy and scenario tests aids in understanding the impact of unexpected events and the strength of the cash flow.

Effect of the Pandemic & Upcoming Trends

As the pandemic redesigns the industry, it is a requisite to modify your properties for better tenant experience as they grapple with making lease payments. It is a daunting task to battle rental deferments and discounts across a large portfolio. Making use of the right technology and tools, you can leverage data to understand the best and profitable use of the properties to optimise lease agreements. Comparisons between tenants, adapting physical spaces to discern their different uses can be done by modelling scenarios.

• The coming years will see an increased focus towards big data and sustainability to drive the investment process.

• Democratisation of data will allow asset managers to integrate alternate data and ESG, and will give way to a surge in investments. Their ability to handle a more opaque and illiquid capital market will increase as they start allocating to private markets.

Consolidation of asset management industries will lead to a synergy between different geographies and enhanced product capabilities. The industry will amalgamate to a barbell shape with the big sharks gaining from market operations through scale on the passive side. Product capabilities, investment performance and client preference will be driven by boutique active asset managers. 

Role of a Data Collecting System

With a data collecting system, the risk of errors is minimal and there is better visibility over asset performance. In a disruptive market, investors require more transparency in financial reporting. With the data system in place, reports can be quickly generated and analysed to provide accurate information to the investors for better informed decision making.

Overseeing this wide ranging set of responsibilities has its own challenges which require planning and coordination. It is through asset monitoring that a long term value creation for real estate investments can be achieved. It encompasses the entire investment process from acquisition, evaluation to business plan creation, implementation and execution. The experience that comes from an asset monitoring firm helps reduce the gap in times of crisis with a strategic plan. They also bring in a team of specialized individuals who calculate the scope of impact over sectors to collectively solve the problem and keep the real estate investments profitable.

The Growing Real Estate Market

Being the most recognized sector globally, and the second highest employment generator in India, the real estate sector is expected to reach US $1 trillion by 2030 and contribute 13% to the country’s GDP by 2025.

According to Colliers India, institutional investments in Indian real estate are expected to increase by 4% to reach US $5billion in 2021, driven by interest of investors towards capturing attractive valuation amid the pandemic. The Indian real estate sector is seeing a high growth with rise in demand for office and residential spaces.

Keeping in mind the aspect of globalization, there have been distinct changes and challenges which have been accepted by real estate developers. The shift from family-owned businesses to that of professionally managed is one of them. There has been an increase in transparency with the rising flow of FDI in real estate. To meet the growing need for managing multiple projects across cities, developers are investing in centralized processes and hiring qualified professionals like asset and project managers, and revamping their accounting and management systems to meet due diligence standards.

Creating an opportunity worth Rs.1.25 trillion in the market in the coming years, the Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, allowing all kinds of investors to invest in the Indian real estate market. Therefore the dynamic growth in this sector requires asset monitoring to mitigate risk based on financial objectives.