Join­ing hands

Re­forms like RERA and GST are prompt­ing smaller de­vel­op­ers to opt for con­sol­i­da­tion in or­der to share costs, risks and at­tract for­eign in­vest­ment

Hindustan Times (Chandigarh) - Estates - - ESTATES - HT Cor­re­spon­dent ht­spe­cial­pro­ n


Con­sol­i­da­tion could be the by word for the realestate seg­ment in 2018. Amid a se­ries of pol­icy changes and a re­lax­ation of for­eign di­rect in­vest­ment norms, smaller de­vel­op­ers are look­ing to join forces with oth­ers in or­der to com­ply and com­pete.

“There is a mas­sive fo­cus on com­pli­ance, doc­u­men­ta­tion and pro­cesses, which has in­creased the costs and com­plex­ity of busi­ness op­er­a­tions ,” says Anuj Puri, chair­man of realty ad­vi­sory Anarock.

“In ad­di­tion, de­vel­op­ers have to in­vest sig­nif­i­cantly in up­grad­ing billing sys­tems, cus­tomer re­la­tion­ship man­age­ment soft­ware as well as train­ing ven­dors, con­trac­tors and other stake­hold­ers to en­sure 100% com­pli­ance with the Real Es­tate Reg­u­la­tory Author­ity and Goods and Ser­vices Tax( G ST) norms. This is cre­at­ing an en­vi­ron­ment of largescale con­sol­i­da­tion among Tier -2 and Tier-3 de­vel­op­ers.”

Take Nir­vana Realty, which fo­cuses on build­ing week­end homes. They re­cently en­tered into a joint ven­ture with a land- owner de­vel­oper for a project in Da­hanu. “The land is theirs, ev­ery­thing else is ours— de­vel­op­ment, con­struc­tion tech­niques and brand name,” says Nir­vana CEO Pu­nit Agar­wal. “It isawi nwin be­cause we got land near the city and they get a share in sales. Part­ner­ships also help di­vide the risk in case of not be­ing able to com­plete projects on time.”

Con­cerns over non- com­pli­ance penal­ties area ma­jor fac­tor driv­ing new part­ner­ships in realestate.

“The fees that de­fault­ing de­vel­op­ers have to pay is pretty hefty,” says Pravin Lad­kat, founder of real-es­tate con­sul­tancy PropRera. “Smaller de­vel­op­ers are worried and want to as­so­ci­ate with the more- or­gan­ised ones to be able to fin­ish projects on time too .”

The crack­down on black money post-de­mon­eti­sa­tion has also worse ned the cash flow prob­lem. “Itis nigh-im­pos­si­ble for the un­der-equipped player to raise fresh funds in such a mar­ket en­vi­ron­ment ,” says Puri.

“Projects fac­ing a lack of funds will hence be sold to large de­vel­op­ers and / or con­verted into other as­sets such as plot­ted de­vel­op­ments. In ei­ther case, largescale con­sol­i­da­tion of as­sets is on the cards.”

De­vel­op­ers are also us­ing con­sol­i­da­tion asa means to at­tract funds from over­seas, es­pe­cially af­ter the re­cent re­lax­ation in norms for for­eign di­rect in­vest­ment in real-es­tate .“A de­vel­oper, for in­stance, has land but no money to con­struct houses ,” says Shankar Aru­mugham, chief op­er­at­ing of­fi­cer for strate­gic con­sult­ing, In­dia and Sri Lanka, at real-es­tate ad­vi­sory JLL. “He can part­ner with a well-off for­eign de­vel­oper and build a project on the land. We are also see­ing part­ner­ships be­tween de­vel­op­ers from dif­fer­ent cities.”

This is good news for buy­ers be­cause it could mean that stalled projects are re­vived and new launches give them bet­ter op­tions to choose from, Aru­mugham adds. “Projects also stand to be­come more re­li­able and trans­par­ent with more stake­hold­ers in­volved.”

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.