The Changing Landscape of Indian real estate
Despite the ups and downs in the sector, the efforts of these business leaders are showing tremendous growth opportunities, paving the way for recovery of Indian real estate in 2019. Here we look at some changes that are emerging in the country’s real estate market and the roadmap developers are adopting to stay on top of the evolving trends.
Front-runners of Real Estate IPO
Companies like DLF and Lodha Group have been building iconic landmarks across Indian cities. Taking the IPO route, these two realty giants are also taking the path of going public for financial stability. With size pegged around Rs 5,500 crore, this will be the second-biggest real estate IPO in the country after realty major DLF raised around Rs 9,200 crore through its IPO in 2007. Private equity major TPG Capital and Starwood Capital-backed real estate developer Shriram Properties is also planning to raise about Rs1,500 crore through its Initial Public Offering (IPO). The company’s maiden share sale is expected to be concluded by March 2019. Puranik Group and VBHC Value Homes are also planning to raise funds through public offerings.
With the struggling sector now stabilising, real estate IPOs are also gaining momentum. The recent IPO filing by Government-owned NBCC in April 2018 received manifold subscription due to their diverse businesses. In terms of private realty players 16 companies have opened their shares to the public till now.
Indian Developer Looking Overseas
The sluggish sales at the home front are driving realty firms overseas Developers such as Sobha, Ajmera Realty, Lodha, Merlin Group, Hiranandani to name a few are taking up projects abroad to maximise returns. For instance, Ansal API is executing projects in Iraq, Russia, Thailand and Bangladesh and Puravankara has established significant presence in Dubai, Colombo and Saudi-Arabia. While, lower input costs, faster approvals and higher profitability are the major draws the international portfolio is also a part of the diversification strategy for lowering risks. The major global markets where Indian developers are setting foot are Middle East, USA, UK and South East Asia.
UK, UAE and Australia are the favourite destinations for the Indian real estate investors where investments have appreciated from 20 per cent to 50 per cent, over the last five years. Lower land prices in some countries and tight regulatory regime are some of the benefits of building projects abroad.
The other end of the spectrum is the foreign Developers tapping the Indian Market and partnering with local developers for joint developments. With a huge land bank of 4,500 acres across India, Dubai-based Emaar Properties is looking for partners to develop some of the land parcels and Condor Group is making a major foray in Kerala. US firm Trump Organisation has brought forth luxurious residential projects in India in partnership with Indian developers like Lodha in Mumabi, Panchshil in Pune, M3M in Gurgaon and Unimark in Kolkata.
The Indian real estate sector is in a state of flux and in the evolving environment developers are coming up with new product formats and business strategies to capitalise on the changing economic scenario and consumer demands.
Striking Gold in Commercial & Logistics
Another area of diversification of business is the warehousing projects. At a time when residential realty is under pressure, developers are utilizing their large land parcels at city outskirts to build warehouses to tap demand from manufacturing and e-commerce firms. Embassy Industrial Parks is today recognised as a leading provider of warehousing and logistics solutions in India with over 30 million sqft space. Hiranandani has chalked out plans to set up warehousing and industrial parks over 400 acres in Pune, Nashik and Chennai. Brigade group is planning facilities on the 50 acres land near Bengaluru international airport as well as in Mangalore and Prestige Estates has also started building a warehouse over nine acres in Bengaluru as a pilot project. What commercial offices did for realty a few years ago, is what industrial real estate is on its way to be.
Talking of commercial real estate, developers are heading towards newer model of development like co-working office spaces, mixed use development containing retail & office areas to integrated-residential and workspace building projects. Riding the strong demand from IT & Banking sector, Building Grade ’A’ office spaces is on the agenda of most developers that are now increasing their commercial projects.
Affordability is the name of the game
‘Affordable housing’ is the sweet spot of today’s real estate industry. Gaursons has been successful in setting milestones in the affordable sector in NCR. Signature Group another major Delhi-NCR player that has successfully launched 7 Affordable Residential Projects under HUDA Affordable Housing Policy in Gurgaon. Poddar housing, Acme Group in Mumbai, PS Group, Eden Raltyiin Kolkata and Felicity Adobe LLP in Bengaluru represent just tip of the iceberg of realty developer initiating affordable housing projects. Being a volumes game, efficient use of low-cost but quality building materials and new age construction techniques are sure to make affordable housing a successful business venture for developers.
Alternatively, the Millennial toady are earning well at young age and are inclined to buy homes only if they are within their budgets and still offer lifestyle amenities. The developers are moving away from luxury homes and now creating projects to suit the need of this burgeoning class that is looking for affordable luxury. Tweaking their products to create smaller but well planned housing units with recreational club swimming pool and sports facility within the project premises is a smart move to stay ahead of times. Many developers across India are now creating such projects as part of their strategic diversification model.
Smaller units are more affordable for buyers which, in turn boosts sale volumes for developers. The demand for Co-living spaces, Studio apartments and 1-bedroom-hall-kitchen near business districts has increased manifold. Thus, developers are reducing the average size of apartments and instead adding lifestyle amenities in the complex especially in metro cities. To increase velocity in a slow market, it makes sense for developers to come up with new offerings to attract fresh customers.