Real estate market sentiments begins to revive amid consolidation

They say every sector has its fair share of losers and winners, an adage that holds true for real estate as well. Smaller developers from the unorganised sector and even bigger firms like Jaypee, Amrapali and Unitech are struggling to stay afloat. There have been increased instances of consolidation in the top nine cities in India, with over 50% of total developers that existed in 2011-12 leaving the market by 2017-18, according to PropEquity Research.

The unorganised players have been unable to cope with the final impact of RERA that insists on regulatory compliances, eventually shutting down the operations. Only the credible developers able to deliver effectively in line with the regulatory requirements have emerged as the true beneficiaries. This, in turn, has benefitted the buyers immensely who are assured of a quality product within stipulated timelines, thus making their purchase decision a risk-averse one.

Most of the small-time developers have either exited the market or joined hands with larger developers. This trend has been witnessed across the country and nothing can spell it our louder than the numbers. At the same time, professionally-run and systems driven realty brands, that ensure quality with a solid value proposition and good returns on investment, have not only been finding takers but are also ramping up sales as well as market share at key locations.

Santhosh Kumar, Vice Chairman – ANAROCK Property Consultants, points out that multiple policy reforms left little room for growth for smaller developers and absolutely none for outright fly-by-night players, who are exiting the market rapidly. The severe liquidity crisis that has beset the real estate sector compels smaller developers to either perish or join hands with their branded, better-capitalised counterparts – effectively reducing their numbers. As long as the liquidity crunch prevails, the gap between the branded and non-branded players will widen in favour of the former.

This obviously has positive ramifications for a market that is clearly sentiment-driven, and what better time for this trend to be rising than Ganeshotsav, which heralds the beginning of the festive season, considered to be the peak period for property transactions across the MMR. For instance, Lodha recently shared that it has sold properties worth almost Rs 3,000 crore in the first five months of this fiscal (April to August). At a time when auto sales have slowed more than 30% and housing is also under stress, this is expected to bring confidence to the market in the run-up to the festive season.

Explaining the growth drivers that have played a role in this regard, Prashant Bindal, Chief Sales Officer (CSO), Lodha, said "We are extremely pleased with our performance across price points. We have had very good sales in our affordable housing projects which now make up over 50% of our residential sales. In addition, our ready projects in Central Mumbai – Lodha Park and The World Towers, which are both ready to move in, are doing extremely well, contributing Rs 600 crore to our sales in the first five months"

According to him, the market share of Lodha in Central Mumbai has now reached 35%, up from20% last year, which is attributed to the high quality of product delivered. Looking forward to the start of the festive season, the realty firm expects to deliver an additional Rs 3,000 crore worth of sales in the next four months till December and further strengthen its leadership position.

Concurring with the market trends, Jayesh Shah, a South Mumbai-based property consultant, pointed out that several factors need to be taken into consideration. Emphasising that certain developers are able to get heir formula right and sustain trust among the buyers, he said, "While the overall market is slow, sales are happening with large players who have a track record of delivery."

According to analysts, this is a healthy trend and such a performance is very heartening because these brands are in effect maintaining the market momentum. Home seekers also seem to be ready to stop fence-sitting and take concrete decisions about ownership. However, 'seeing is believing' when it comes to signing on the dotted line.

"We have observed that new launches from the reputed developers are receiving an encouraging response from the market. The consolidation and consequent shrinking of the market combined with the developers reducing the unit sizes to enhance affordability and boost volumes are working together in favour of sales. Thus absorption levels are going up, which is expected to continue as minimum demand for housing is pre-existing and we expect the demand to climb further," Samir Jasuja, founder and managing director at PropEquity.