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Offshoots of RERA-triggered consolidation in the real estate sector in India

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Girish Bindal
Girish Bindalhttps://www.proptiger.com
Girish Bindal is the Head of Content at PropTiger.com. He draws from more than a decade of cross-industry experience and has worked for brands in the Real Estate, Recruitment and Consulting domain. In his current capacity, Girish is known to gel the news, numbers and opinion to drive the content consumption. With an analyst’s approach and a sharp focus on numbers, Girish has been organically progressing the brand to build a growing base of audience.

The advent of Real Estate Regulatory Act (RERA) has several offshoots; while some of them are quite visible, there are many which are not explicit enough. However, they have a tremendous magnitude. The stringent provisions of the Act have made it clear that real estate development is going to be a highly responsible activity. The real estate development companies will be fully accountable towards the buyers, and there will be a strong focus on delivery of projects than launching.

The real estate sector in India is indeed under the phase of consolidation. Naturally, as it is supposed to be, consolidation has brought a level of discomfort for many real estate companies. Quite a number of small to large real estate developers have lost their will to weather the storm. Every second day, media is coming up with news on some or the other company reeling under troubles and even filing for insolvency. This includes beleaguered realty giants like Unitech, Jaypee and Amrapali Group which have projects spanning millions of square feet of incomplete projects.

The ongoing trends indicate that the sector will have fewer players than earlier. Historically, the real estate sector in India had low entry barriers, and anyone could become a builder per se. Thanks to the stringent provisions laid down by RERA, only serious, skilled, well-capitalised players will be able to enter the business and survive. It will be all about project delivery, no matter how well a project is conceived.

The companies which have long-standing brands will be well-positioned to get benefit out of the ‘survival of the fittest’ scenario. This is why we will find corporate brands such as Tata Housing, Godrej Properties and Shapoorji Pallonji adding more real estate projects to their portfolio through various diverse routes.

It wasn’t a surprise when the top brass of Tata Housing was quoted in a media interview stating that their company is open to bringing more projects under their belt via three routes – joint venture, joint development and outright acquisition of assets. The same goes with Godrej Properties which has been reporting improving sales volumes at a time when most of the real estate developers are striving to keep the ball rolling. The company gives all the credit to their project delivery capabilities and believes that this is how their brands manage to retain consumer confidence.

Tata Housing, on the other hand, has already earmarked a corpus of Rs 800 crore to add 8-10 real estate projects, both greenfield and brownfield. The brownfield projects could be the ones which hold good potential and are available at attractive valuations. The company is reportedly on a lookout to buyout under-construction properties that are under distress.

Over the past few quarters, a number of global institutional investors, such as Blackstone Group, Goldman Sachs, GIC, Brookfield Asset Management, Canada Pension Plan Investment Board (CPPIB), and Qatar Investment Authority, have been on a spree to acquire real estate assets in India in tie-ups with reputed realty companies. Most of the deals have been under discussion stage, and it is expected that many of these will come to fruition in 2018.

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Girish Bindal
Girish Bindalhttps://www.proptiger.com
Girish Bindal is the Head of Content at PropTiger.com. He draws from more than a decade of cross-industry experience and has worked for brands in the Real Estate, Recruitment and Consulting domain. In his current capacity, Girish is known to gel the news, numbers and opinion to drive the content consumption. With an analyst’s approach and a sharp focus on numbers, Girish has been organically progressing the brand to build a growing base of audience.
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