Recently many developers have begun to panic.

This time, it seems that everyone is taking it extremely seriously. No one knows why, but every real estate practitioner and every enterprise is acting with full attention. Three meetings originally scheduled for next week have all been notified to be postponed. Among them, the president of one company, who was supposed to hold an in-person communication, said that he rushed back from abroad urgently, and the first thing he did was to gather all senior executives of the company to sort out supply sources, clarify key time nodes, and confirm all current cash flow. All preparations point to one hypothesis: what should we do now if off-plan property sales are truly replaced by completed property sales?

It is rather strange. The policy announcement on August 28 was in fact a general concept put forward at the top-level design, with no specific implementation details released. But this time, everyone believes that this is a policy that needs to be implemented immediately, and no one even thinks there is any ambiguous buffer zone. All are thinking about how they should operate under the completed property sales model.

At this very moment, land acquisition strategies have been put on hold, teams in charge of upcoming property launches are focusing on capital recovery, and product positioning teams are also rethinking their plans. Everything is being rearranged around this new proposition. Everyone seems to be very anxious, but also exceptionally earnest. Behind this earnestness is the shared eagerness to figure out the right way to move forward.

So what exactly are people panicking and anxious about?

01

The biggest change at present, in essence, is that the entire operation rhythm of property developers has been completely altered.

No matter whether the past off-plan property model was reasonable or not, the entire organizational structure of enterprises has long been operating around the rhythm of off-plan property sales. The financial system has also formed a complete operation logic adapted to this rhythm. After all, real estate is a capital-intensive game, and the turnover rhythm of each sum of capital determines the entire operation mechanism and model. Including the calculation of profit points, the standards for investment and financing, and the intensity of product R&D, all are choices made based on a relatively transparent financial accounting system. I believe everyone can understand this: as commercial enterprises, all decisions must be made on the premise of ensuring profitability.

But now, if off-plan properties are transformed into completed properties, the two most critical changes are as follows: First, the profit margin will change significantly. Obviously, more capital will be invested, but the capital recovery period will be much longer, which will inevitably lead to a decline in profit margin. Second, the cash flow situation will also change. There will be more variables in the capital return cycle and key nodes, and the uncontrollable risks will increase accordingly.

For enterprises, the two most core factors, profit margin and cash flow, are now changing due to the new policy. This has led to the situation that enterprises dare not spend capital arbitrarily recently. I have heard that several property developers have postponed their land acquisition plans originally scheduled for September, and they will not make final decisions until the policy details are clarified. In addition, internal decision-making of enterprises has also become hesitant: for example, the depth of product R&D, the marketing strategies to adopt, and product positioning, all these links are being adjusted.

The only consensus reached is that all parties are stepping up efforts to recover cash flow. All available properties for sale are being promoted at full capacity. No property developer has told me that they have the intention to raise prices, and all are selling at fair prices. Because the only foreseeable fact is that only by holding sufficient cash flow at present can they take the leading position in the future market.

However, these are only superficial phenomena. Behind the surface, more deep-seated anxieties are beginning to emerge.

02

First of all, can enterprises adhere to the principle of completing one project before launching the next one unswervingly?

The principle of "completing one project before launching the next" has been put forward as a corporate strategy by many real estate enterprises in the past year, which is essentially an extension of the single-project-centric operation concept. But more importantly: if the previous standard was to successfully deliver every project you start, the core now is that you can only acquire the next plot of land after you fully finish the previous project. This will surely become the new operation rhythm for real estate enterprises in the future.

Essentially, the core test for cash flow is: the cash flow recovered from the successfully completed previous project will be used as the start-up capital for the next project, so that enterprises can realize the transformation from the past capital rollover model to the current single-project rollover model. This will become a new trend for property developers. You must finish all the scheduled work of one project within the specified time, and then you can start the orderly operation of the next project. The importance of project operation managers is far greater than that of financial calculators in the past. Enterprises need to transform the capital management logic into project operation logic to ensure the smooth operation of the whole company.

But this is often the most difficult part, because the overall thinking of most practitioners cannot be adjusted immediately. At this time, the courage and determination of the enterprise leader will play a decisive role.

Secondly, do you have the ability to develop the right product at one go?

The past logic of real estate project operation was "move forward while adjusting". Many projects even started construction without clarifying whether the properties would be delivered with fine decoration or as bare shells, because there was room for adjustment in the later stage. As for community operation services, these contents were regarded as the extended part of the later marketing stage, and would be adjusted bit by bit during implementation. Since products could be sold to customers through pre-sale, developers could indeed adjust the products while constructing them.

But now, in essence, selling a property means delivering it to the buyer, so you have to make the product completely correct at the first attempt. Before the product is launched to the market, you have no way to test whether the product is qualified, and you will know the result only at the moment when it is officially presented to the public. This is quite similar to the current new energy vehicle and smartphone industries, where almost no enterprise can be 100% sure that their product is perfect before its official launch.

This also means that real estate enterprises in the future need to have several capabilities at the same time: the ability to insight into customer demands, the ability to predict the changes of customer demands in the future, and the ability to lead market changes.

Only by possessing all these three capabilities at the same time can you maximize the possibility of ensuring that every product is free of defects. Behind this is a very important decision: the transformation from 0 to 1 at the very beginning — during the product R&D process, dissolve the marketing department and expand the customer research department. We have expressed our relevant views before: property developers should dissolve the marketing department immediately, and this action is even more necessary now.

Why was the marketing department needed in the past? The existence of this department was to help enterprises judge what level of sales speed and profit margin is reasonable. But now if you don't understand customers, all these judgments are essentially worthless. Investing heavily in the customer research department is a decision that real estate enterprises don't even need to think about at present.

I have heard from nearly two property developers that they have set up a special customer research fund to support this department to become the core department of the company. Coincidentally, last weekend, due to the policy changes, we also quickly finalized two consulting cooperation projects. The only demand the developers put forward to me is to help them embed the customer perspective into the whole product development process. This is no longer an optional optimization, but an inevitable part of the product R&D process.

Ensuring that the product is developed correctly at the first attempt and ensuring that all actions at each key node are implemented unswervingly — this is the execution capability that every property developer needs in the new cycle.

Do you have the high-quality resource integration capability?

Essentially, property developers are resource integrators. If you dig deeper into the requirement of making the right product, the core question becomes: is it possible to integrate excellent resources to help continuously deliver qualified products? Because what you need to get right at the first attempt is not the design drawing or concept, but the real physical presentation of the property. What this tests is not the willingness of a property developer, but more importantly, its resource integration capability.

What this reflects is the reform of the procurement department of a real estate enterprise, which is almost the most in-depth adjustment. The following words may sound straightforward, but the truth is exactly like this. In the past 20 years, what was the procurement logic of real estate enterprises? Comparing quotations from three parties + awarding the contract to the lowest bidder. This logic was effective under the past fast-turnaround operation model, which could reasonably control costs and avoid corruption. But this logic will no longer be applicable under the background of the completed property sales era. If you choose all suppliers only by pursuing cost performance, you are destined to produce a mediocre project.

In addition, from another dimension, how to avoid corruption problems in a project? How to ensure that the high-quality configuration of the project is reasonable rather than abnormally high? This is still a proposition that needs to be considered. Therefore, the procurement department has essentially become the department that most urgently needs to be reformed to reshape the single-project-centric operation system.

The transformation from off-plan property sales to completed property sales is not a simple question of "whether you want to make good products" or "whether you are willing to spend money on projects". What it tests is whether the entire organizational framework has the ability to deliver high-quality projects. This is never the sole responsibility of a single department such as the marketing department or R&D department, but the consistent requirement of the entire company and the whole group.

03

So if you ask for my opinion, I only have one suggestion: why not take the initiative to try the completed property sales model?

Yes. Instead of guessing whether there is an ambiguous buffer zone for the policy and checking the differences in implementation standards across different cities, it is better to carefully select one or two projects, take the initiative to develop them as completed properties and then put them on sale. You need to know that you will never know how many problems need to be solved behind this model until you go through the whole process completely. That is the meaning of practical implementation.

Zhenkun in Nanjing chose to implement active completed property sales two or three years ago. In this current cycle, this brand is operating with great ease and outstanding performance.

How to describe the anxiety of property developers at this moment?

There is a slightly overused saying that is very appropriate for the current situation, which comes from Nietzsche: "When you gaze into the abyss, the abyss is also gazing into you." The anxiety at this moment is exactly the anxiety that everyone feels facing the unknown, yet not happening but inevitable final outcome of the industry.

But rather than being anxious, it is better to face this problem squarely. The final outcome of the real estate industry will come eventually. What you need to do now is to figure out how to build better houses and improve your own capabilities. Apart from that, there is no other better solution.

This article is from the WeChat official account "Zhen Jia Lusun", the author is Zhen Jia Lusun, and it is published with authorization from 36Kr.