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Indian real estate has been increasingly moving towards more organization over the past few years. Though part of the process is rooted in organic growth, a part of the transformation is also driven by a liquidity crisis and RERA formation. Raising private capital is increasingly becoming difficult for small and medium-sized developers, which is often forcing them to partner with larger players or get acquired by them. RERA has also stipulated that developers need to now earmark 70% of the receivables into escrow accounts, which has further affected their funding mechanism.
Additionally, the current lockdown 2.0 will further accentuate the crisis, thereby forcing more organization into the industry. Developers and advisories with strong cash flows, powerful IT & technology bandwidth, and advanced marketing acumen will survive, sustain and eventually move towards larger growth trajectories. On the contrary, for smaller developers and brokerages, the situation will continue to appear grim.
Listed Developers will Expand their Market Share
The current crisis has once again altered the otherwise buoyant mood in the industry resulting in a sharp decline in sales. The turbulence will continue for some time till the ongoing medical challenges can be contained. This time we might expect a quicker comeback as most of the developers have faced a similar situation in the previous fiscal and hence have a recovery roadmap at their disposal.
Nevertheless, the revival will be skewed towards larger and listed players. Earlier also we have seen that while small developers suffered, big players emerged stronger after the crisis. As per the rating agency ICRA, the top 10 listed Real Estate companies registered
61%, despite the overall market being lower than the pre-COVID levels. Most of the big developers such as Sobha, Godrej, Tata Housing, etc. posted higher profits. Similar trends will chronicle even in the coming time as well.
Investments in Technology will Rack-Up
The previous year saw a sharp rise in investments in proptech. For a while, industry leaders have been mulling over investing in technology. However, the industry maintained a demure approach, which finally changed the previous year, when the nationwide lockdown was declared. Pursuant to the declaration of the lockdown, realtors, developers, and advisories invested heavily in technology and innovation to continue operating seamlessly.
Going forward, advisories and developers will continue to invest heavily in digitization and technology. The investments will be directed with both strategic as well as operational objectives. Investments will rack up in developing Space Planning software such as digital walkthroughs, AR & VR-based applications, 3D renderings etc. Similarly, investments will rise in digital marketing and gradually the online medium will continue to consolidate its position as the principal marketing channel. Likewise, increased investments will unfold in developing data analytics-based platforms, predictive models, etc. All these will further organization in the industry.
As CAPEX & OPEX Rises, New Models will Emerge
As more organizations will follow, it will require increased investments. However, ironically at a time when top lines and bottom lines will be under pressure, unlocking additional funds would be easier said than done. In such situations, new business models will emerge. There will be a growing focus on strategic partnerships, franchise models, etc. that can reduce the CAPEX and OPEX without compromising on business objectives.
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