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The complexion of the largely unorganised Indian real estate industry may change with the entry of big business groups in the residential segment. The latest one to get on the bandwagon is the Bharti group. Godrej Properties, Hero Realty, Tata Housing and the Mahindras have been slowly making their presence felt over the past few years.
According to experts, buyers are increasingly tilting towards this new breed of realty players that are offshoots of big corporate houses. A leading consultant based in Gurgaon says, “Despite a slow phase for most developers, players such as Tata, Godrej and Mahindra are still seeing an uptake in the sales because of the brands associated with them.”
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The sector is plagued with delayed deliveries and developers going back on their commitments, which have given rise to a new level of consumer activism. The lack of a regulator aggravates issues. “Such a scenario has created space for the realty arms of corporate groups in an otherwise crowded market. And since some of these groups are listed, there is much more regulation of their realty arms,” the consultant quoted above adds.
Anshuman Magazine, chairman and managing director, CBRE South Asia, says the entry of corporates will change the dynamics of the industry. “The main advantage is that these groups have diversified businesses with alternate sources of funding. Also, with their own systems and processes in place, the scenario for the industry will change for the good.” The
increased competition will result in better products and services, besides improving confidence in buyers, he adds.
Bharti Realty recently announced its first residential project in Surajkund. It has ongoing projects in Haridwar and Ludhiana. S K Sayal, chief executive of Bharti Realty, says, “The entry of corporates will change the business and it will attain the status of an industry. The confidence in the market is zero towards typical developers. Nothing is selling, but I believe with the business getting into the hands of corporates, trust and confidence will come.”
These groups are committed to timely delivery and there is no compromise on quality even if it means selling at a premium, an expert says.
Most realty arms of business groups do not purchase land outright but follow a joint venture model with landowners to save on costs and time.
“With our joint venture model, we can do more projects with the same amount of capital. Growth prospects are much higher and from a risk mitigation point we can diversify investments into a larger number of projects. We are assured of higher returns, though we share profits with the land partner. Our model facilitates faster growth than locking up capital and buying land,” Pirojsha Godrej, managing director and chief executive officer of Godrej Properties, had told Business Standard earlier.
