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Number of small real estate developers drop 50% across 9 cities as homebuyers pick top players: PropEquity

Over 50 per cent of the developers that existed in India's top nine cities in 2011/12 exited the market by 2017/18, PropEquity states.

twitter-logo Goutam Das        Last Updated: July 9, 2019  | 09:50 IST
Number of small real estate developers drop 50% across 9 cities as homebuyers pick top players: PropEquity
Numbers released by real estate analytics company PropEquity suggest that top developers are replacing smaller players across the country as homebuyers, cheated over the last many years, pick companies with a better track record of execution.

Numbers released by real estate analytics company PropEquity suggest that top developers are replacing smaller players across the country as homebuyers, cheated over the last many years, pick companies with a better track record of execution.

Over 50 per cent of the developers that existed in India's top nine cities in 2011/12 exited the market by 2017/18, PropEquity states. The biggest decline is in Chennai where there were 445 developers in 2011/12. The number crashed 77.3 per cent to 101 in 2017/18. Gurugram and Noida are not far behind - the number of developers in these cities dropped 76.8 per cent and 73.2 per cent, respectively. Kolkata dropped 64.7 per cent, while numbers in Bengaluru fell 61.1 per cent. Of the nine cities tracked by the analytics firm, Pune showed the lowest decline of 19.3 per cent.

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Falling numbers of developers indicate consolidation in the market. Most of the unorganised and small-scale developers have either exited the market or joined hands with larger developers. The share of the top 10 developers has consequently increased which as a percentage of overall projects in Gurgaon and Noida is at 55 per cent and 78 per cent, respectively. In 2011, it was 28 per cent and 52 per cent, respectively, PropEquity adds.

The analytics firm listed a number of reasons that led to developer distress. These include lack of execution capability, oversupply of inventory, GST, Demonetisation, excessive land banking, lack of understanding of the demand-supply dynamics, unjustified price appreciation, lack of social and physical infrastructure in emerging markets. They all came together to create a perfect storm, Samir Jasuja, Founder and Managing Director of PropEquity, notes.

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"Interestingly, this storm started building way back in 2010. Maximum launches in India were witnessed during 2010 to 2013 leading to a situation of high supply and consequent absorption being largely led by investors.

This illusion of demand led to more launches and a huge demand-supply mismatch especially in Tier-1 cities and most specifically in NCR. Today, the effects of this perfect storm have led to the consolidation of developer numbers across India. The unorganised players have been unable to cope with all these mounting market issues and the final impact of RERA that insists on regulatory compliances," Jasuja adds.

Also Read: Big relief for home buyers! Now, claim additional Rs 1.5 lakh tax deduction on interest paid on home loans

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