The CEO and Founder of Square Yards, India’s predominant real estate aggregation and transaction platform, Tanuj Shori, feels that the COVID-19 pandemic may have hidden opportunities for the industry in its wake. He feels that there is another round of consolidation that will transform the sector, particularly due to newer strategies, changing consumer behavior and business methods and of course, reforms in terms of product design.
The first consolidation wave was witnessed back in mid-2019 where close to 50% of real estate developers in India’s top 9 cities, who functioned in the 2011-12, exited the sector or merged with bigger players owing to several factors. Shori labels the COVID-19 pandemic as the perfect storm for the sector which was already distressed due to factors like oversupply of housing inventory, financial woes, GST problems, huge land banks, low consumer demand and the NBFC crisis. Having pinned their hopes on a revival in 2020 with growing demand for affordable housing across emerging locations, developers were left shell-shocked as COVID-19 took it up by several notches.
As per reports, another 30% of real estate developers may seek an exit in recent times. The liquidity crunch faced by realty players in Tier-2 and Tier-3 cities will further speed up this consolidation while NBFC disbursals have come down considerably as well. This consolidation in the market will lead to big players enjoying opportunities at considerably lower/discounted prices for acquisitions. This will be great news for prospective home buyers who had lost faith in an industry plagued by quality issues, failed timelines and lack of transparency.
Larger players have also made the transition to digital and posted excellent sales figures in turn. Missing the bus in terms of technological advancement will make several other smaller players exit the market or merge with the big guns. Unorganized players will lose out on market share and the industry will be dominated by a few leading real estate brands. These will be players with time-tested delivery records, ample customer trust, stronger balance sheets, excellent digital ecosystems and capabilities for execution.
Ultimately, this will benefit the Indian real estate sector, putting it firmly on the recovery path. Residential real estate will witness stronger affordable housing demand as home buyers are encouraged to invest more in quality housing products from leading property developers. These bigger guns will start creating stronger housing portfolios along with catering amply to rising demand. Incomplete projects by unorganized players will be suitably fast-tracked by higher liquidity infusion by well-established property brands. This will boost the entire supply chain while overall accountability, transparency and credibility will go up manifold across the sector.
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Published Date: 28 July 2020