Consolidation in India's residential real estate set to gain ground

Top listed players eyeing higher market share

The consolidation in residential real estate is set to go up further with the market share of big listed developers expe­cted to grow over the next two to three years. This is because buyers are leaning towards top listed brands. 

The pan-Indian residential market share of the top listed developers will grow from 25 per cent in FY21 to 29 per cent in FY24, said a recent report by ICICI Securities. 

“Most developers in the listed space have aggressive launch plans from H2 of this financial year and are looking to grow at a double-digit sales CAGR (compound annual growth rate) over the next two-three years.  This will lead to market share gains assuming that the industry size remains stagnant. We assume that overall annual residential market sales value will remain similar to FY20 levels in FY23 and FY24,” said Adh­idev Chatto­padhyay, vice-president, equi­ty research — real estate — at ICICI Securities.

Chattopadhyay believes that owing to healthy balance sheets, access to capital and many unlisted developers being shunted out, the market share of large organised developers is set to grow further in the next two to three years. 

For instance, Godrej Prop­erties is looking to invest $1 billion in the next couple of years to acquire land and develop properties. It is looking to have a sales booking of Rs 10,000 crore by FY23.

Pirojsha Godrej, chairman of Godrej Properties, in the latest annual report, said the company remains committed to two medium-term goals of being among the leading deve­l­opers by value of housing sales and achieving a return on equity (RoE) of over 20 per cent. “The progress in market share gains has been encouraging, and combined with sustained momentum in new project additions, puts us on track for the first of our two medium-term goals,” he said.

Godrej Properties is looking to launch 13 million sq. ft of residential projects in FY22.

Bengaluru-based Prestige Estates Projects is also looking to increase its market share by 50 to 100 per cent in its main market of Bengaluru in the next three-four years, said its chairman and managing director Irfan Razack. The company is aiming to have sales bookings of Rs 10,000 crore by FY25 or even before, Razack added. 

According to the Prestige management, residential laun­ches of 12-15 million sq ft have been lined up between Sept­ember 2021 and March 2022 across South India, NCR (Delhi) and Mumbai.

Rating firm ICRA, in a recent report, said home bu­yers have been leaning towards completed inventory and developers with a track record of on-time as well as quality project completion. This has led to increased market share for the top nine listed realty players, from nine per cent of sales in FY17 to over 16 per cent in FY21.

Anuj Puri, chairman of Anarock Property Consul­tants, said in the demonetisation, Real Estate Regulatory Auth­ority and goods and services tax (GST) regime, consolidation within the real estate sector has been on the rise. It has seen an increase in the dominance of organised and branded players. 

“The Covid-19 pandemic has only accelerated this consolidation wave with financially strong and organised developers gaining more market share. Buyer preferences have also boosted these players’ supply and sales share,” he said.

According to Anarock, of the total sales of about 2.03 lakh units across the top seven cities in FY17, the share of top eight listed players was six per cent and that of leading unlisted players was 11 per cent. Around 83 per cent share was of unorganised players.

In FY21, of the total units sold (around 1.58 lakh units), the share of top 8 listed developers stood at 22 per cent, leading unlisted players share was 18 per cent while that of others was just 60 per cent.