Realty Sector will move towards Corporatization
Harish Sharma, CEO, Centrum REMA Centrum Real Estate and Management Advisory (REMA) believes that developers will need to revamp their business models in accordance with the transparency and accountability requirements under RERA.
The real-estate industry is going through a transition. With the introduction of RERA & GST, the Government is taking significant measures to streamline the real-estate industry and bring about more accountability & transparency. Developers have traditionally been un-organised and have been facing challenging times with declining sales and project delivery delays. The issues vary from approval delays, lack of financing or waning buyer’s interest.
Hence, there is a need for lot of organized players and we see immense opportunity in the realty management and advisory business. Any real-estate development project requires an initial equity capital, then finance and during the construction period, the working capital. The biggest difficulty faced by a developer is the dearth of finances and in-efficient sales & marketing. There are enough projects that are well funded and yet not delivered on time because their sales were not keeping pace. There are also many projects where the developer is able to sell but they do not have access to funding which slows down the process.
Also I believe, homeowner is the biggest stakeholder in the entire process of real-estate market. As he is the one investing his life savings to buy a home, the developers need to ensure that his investment is safe and a good quality product is delivered on time. This means that all due diligence and financial closure should be in place and homebuyer is kept abreast with the project details and development in a transparent manner. Thus, the marketing strategies too will be completely end-user driven. Channel partners form 40 – 80% of the industry sales. They too need to adopt the client centric practices offering trust and transparency. Centrum REMA will strategically partner with Developers and provide comprehensive services such as sales & marketing, financing and channel & client management for on time delivery.
There are multiple selection criteria for taking a developer on-board. First, the project should be free of any legal and technical issues and the approvals and land clearances are in place. Secondly, the particular loan amount eligible for the project is based on the financials and cash flow of the project. The challenges of the industry are that most of the time developers have banked on sales to carry through the project without taking in account the financing and sales model.
We as the advisory service provide our stakeholders assistance in all three areas: finance through our NBFC, provide technical and legal assistance and sales & marketing support.
Centrum REMA was launched in mid-October 2017 and has already signed with two developers. We are involved in selling close to 2 lakh square feet of inventory across 2 – 3 projects. The value of these transaction put together will be around Rs. 200 crores. We are in process of signing with another 3 to 4 developers. Centrum REMA services cover:
- Developers – Help raise capital through equity & debt financing, generate cash flows through sales & marketing, provide general management support, technical & legal assistance through an in-house team and empaneled architects and lawyers.
- Channel Partners – Assist in deal closure, provide time bound brokerage payments and maintain client confidentiality.
- Clients – Assist in providing transparent and consistent communication on project development status and structure sale / purchase agreements in line with RERA regulations.
We will help developers achieve financial closure through raising finance and by sales and marketing. Centrum REMA will take the mandate for selling the entire inventory of the project by entering into exclusive partnership with the developers. We also want to help developers achieve project delivery in the right time. The company plans to operate in the mid segment and provide services and the management bandwidth to help them scale up to the next level. We will enrol channel partners too, get them RERA compliant, provide them with marketing lead generation support and help them in closure of sales.