Join us on a virtual tour around three loan projects funded on the EstateGuru platform which are currently under construction. Despite the turbulent times shaking the world, it’s more or less work as usual for these entrepreneurs. As you’ll see, there’s lots of activity on these sites – both inside and outside. Many of the projects are already in the final stages, with interior finishing works progressing fast. Our aim was to determine how they see their business plans evolving in light of the current changes in the economy.
As you probably know, EstateGuru’s headquarters are located in Estonia, which may be the nation best prepared for the consequences of the pandemic, both economically and socially. The country’s economy is bound to tech, its government is digital, and most services in the country either are or can be provided electronically—in fact, it’s nearly impossible to overstate the extent of Estonian digitization, according to The New Yorker. This also applies to digital registries that are vital for the real estate business. This all contributes to businesses continuing to operate with only minor changes implemented to keep people safe.
While it is everyone’s duty to safeguard their employees’ health and not contribute to the spread of the virus, it’s vital to understand that real estate is a localized business. With no offices on the grounds, entrepreneurs have the opportunity to manage their projects in a clever manner which will result in only a very small restructuring of how they work. For example, applying the correct precautionary measures and extra steps to ensure the health of all people involved.
CEO and owner of Farmada Invest Heiki Salumets is developing a large private housing district in Tartu. According to him, his main protection against the current situation is his decision to hold the entire business chain in his own hands – development, construction, materials etc. This ensures the minimum purchasing price for the material. In addition to all the negative aspects, he cautiously describes the current situation as having its perks in the real estate market – for example, in normal business conditions, sanitary engineering for one unit costs €10,000, but in the current circumstances they can be acquired for as little as €4000. To maintain a conservative approach and stay alert, his business model predicts a slightly longer sales period for the more expensive units. “Given that my exposure in EstateGuru for one land unit is €18,000, an attached house (2 units) can be built at the extra cost of €90,000 and the sales price for 2 units is €280,000, I feel confident in the financials as well as our ability to overcome this situation,” he adds.
Owner Tauri Soonberg describes how they have changed their supply chain to keep the entire team healthy. The main difference is the means of purchasing the construction material – all communication has been brought online, and all material is being ordered online and delivered to the development site to avoid potential contact with other people. He has the strong belief that there will be no long-term effect on the real estate development industry, however, certain fluctuations may be visible in the rental industry – but this does not affect his business.
Endover’s CFO Kaspar Allese confirms that all construction activities are continuing as normal, and all focus has been placed on finalising ongoing developments. Kaspar is fully aligned with the understanding that sales might require more time, however, the Klaussoni development is already 50% pre-sold and is a unique project in the city centre of Tallinn, where demand is high. At Klaussoni, they have taken the serious and strict precautionary measures of checking the body temperature and symptoms of all employees and subcontractors. Also, all contact between people at the development has been brought to a minimum – construction is a great business in which you have the full possibility to do this. People with even the slightest symptoms are not allowed on the site.
All the developers we interviewed say they place a very high value on EstateGuru and its investors’ approach during these difficult times. “The operative nature of EstateGuru is highly valued in the construction industry, and especially during challenging times. We are eager and optimistic that apartments will be finalised in May-June, which is also when they will be handed over to their new owners,” added Kaspar.
We are all 100% confident that many happy people and families will be living in these buildings and calling them home by the summer of 2020. So, let’s keep calm and stay in touch! Don’t hesitate to ask us anything: firstname.lastname@example.org