Reforms, new legislations consolidate the real estate market
A raft of reforms and legislations in the real estate sector is driving consolidation with several smaller realty developers either monetizing their land parcels on outright basis or entering into joint development or development management agreements.
Last November’s surprise demonetisation of high-value notes has induced an unforeseen liquidity crunch worsened by banks that have been reluctance lenders following a crackdown on NPAs by the Reserve Bank of India. This affected quick transformation in sector known to benefit from unaccounted cash transactions.
“Small and mid-sized developers are finding it tough now because of strict RERA guidelines and their lack of strong credibility to generate sales given the homebuyers’ current preference for solid execution track record. Apart from this, absence of financial strength is also pushing them towards forming alliances with big developers,” said Ankur Srivastava, chairman, GenReal Property Advisors.
“Business is changing and these are big changes. One will have to adapt to the new realities to move further. We have been making structural adjustments to align with the changed environment,” said Dharmesh Jain, CMD, Nirmal, which has been forming alliances to monetise its land parcels to ease debt burden
Nirmal recently entered a partnership with Godrej Properties to build a residential project on a 14-acre land parcel in Thane. This pact was facilitated through Nirmal’s strategic arm Nirmal Ventures. The newly launched vertical of debt-stressed Nirmal is looking garner more such partnerships.
“With recent regulatory changes, it’s clear that not-so-serious operators will not be able to sustain for long. This would leave very limited scope for homebuyers getting cheated or misled,” said Tarun Shah, a homebuyer of residential project Tanvi Eminence in Mira Road near Mumbai.