Small players may vanish after consolidation

Updated: Mar 31 2008, 04:19am hrs
Sanjay Mathur, Head, marketing, Pearls Infrastructure Projects Pvt Ltd

India has reached a stage where every area has undergone a sea change over the past few years. Furthermore, the real estate sector today seems to be one of the most flourishing sectors of the Indian Economy, fetching high returns for investors.

It is worth mentioning that the real estate industry has mastered the art of four Bs. Also, the government should consciously make an effort to create an environment that would allow the industry to operate smoothly so that the four Bs the builder, the buyer, the banker and the broker co-exist adhering to right business policies and practices in the near future. One would witness more transparency and a philosophy of mutual benefit amongst the four Bs, and the developer would strive to provide world-class quality to projects implemented. The fact cannot be denied that developers in todays modern scenario need to tread very carefully and follow these four Bs in their business practices in order to build world-class projects, brand companies and projects well, borrow very cautiously in funding their projects and be buyer-oriented to ensure they are benefited and get value for money.

It is a noticeable fact that the real estate market in India has been doing exceptionally well for the past one year. While residential and retail prices have shot up, the commercial prices in all the metros have been keeping pace with inflation.

The moment developers start construction, they ensure that roads, water supply and other infrastructure facilities are readily available. We do not compromise on the basic amenities of life. The Real Estate Management Bill, which was introduced during the monsoon session of Parliament, is yet to see the light.

Furthermore, land is made available to developers so that more projects could come up. Schemes like PPP (public-private partnership) and BOLT (build, operate, lease, transfer) are to be taken seriously and should be implemented wherever possible. Despite a recent report saying this industry has drawn deals worth $2.2 billion in the first half of 2007, fund crunch could still continue to constrain upcoming developers.

The industry believes that as far as the scenario after Budget is concerned, the real estate sector has witnessed a price correction of 10% to 30% depending upon various locations and cities. In addition to this, the demand for the real estate business will surface soon as the interest rates have fallen 10%. This is exclusively because the end-users are postponing their decision but the demand for housing still remains high. At present, pushing reforms at the state level is important for meeting the growing demands of the masses and also adding to the overall growth of the real estate market.

The real estate sector will see a lot of consolidation in the forthcoming months. However, the small firms that have jumped into this business will face a great deal of difficulties in arranging funds. Chances are, they may get out of this fast growing competition despite having enough land banks. As far as the more established developers are concerned, they would witness joint ventures with foreign companies and market leaders in order to move ahead.

Lastly, it can be said that the real estate sector still has a lot of scope and plenty of opportunities. There is a shortage of 25 million housing units in the urban market. Of this, only 10% of the demand can be truly met with the best efforts of the government and the industry. The future of this real estate business is still very bright. Also, the industry will get consolidated and will gain from strength to strength after this very temporary phase of slowdown.