Consolidation of Indian residential real estate will gain ground

Consolidation of residential real estate will further accelerate with expected growth in the market shares of large listed developers over the next two to three years. Indeed, buyers are turning to the most popular brands.

The pan-Indian residential market share of major listed developers will increase from 25 percent in FY21 to 29 percent in FY24, according to a recent report from ICICI Securities.

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

Chattopadhyay believes that due to healthy balance sheets, access to capital and the crowding out of many unlisted developers, the market share of large organized developers is expected to increase further over the next two to three years.

For example, Godrej Properties is looking to invest $ 1 billion over the next two years to acquire land and develop properties. He is looking to have a sales reservation 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: to be among the top developers in terms of home sales value and to achieve a return on equity (RoE ) by more than 20%. . “The progress in market share gains has been encouraging and, combined with sustained momentum in adding new projects, puts us on track for the first of our two medium-term goals,” he said. declared.

Godrej Properties is looking to launch 13 million square feet of residential projects in fiscal 22.

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

According to Prestige management, residential launches of 12 to 15 million square feet have been scheduled between September 2021 and March 2022 in southern India, NCR (Delhi) and Mumbai.

Rating firm ICRA, in a recent report, said homebuyers looked at completed inventory and developers with a track record of delivering projects on time and of quality. This led to an increase in the market share of the nine main listed real estate players, from 9% of sales in fiscal year 2017 to over 16% in fiscal year 21.

Anuj Puri, chairman of Anarock Property Consultants, said that under the demonetization, Real Estate Regulatory Authority and Goods and Services Tax (GST) regime, consolidation within the real estate industry is on the rise. He has seen an increase in the dominance of organized and branded players.

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

According to Anarock, out of total sales of around 2.03 lakh units in the top seven cities in fiscal 2017, the share of the top eight listed players was 6% and that of the main unlisted players was 11%. About 83 percent of the shares were unorganized players.

In FY 21, out of the total units sold (around 1.58 lakh units), the share of the 8 main listed developers was 22%, the share of the main unlisted players was 18% while that of the others was only 60%.

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