With Exit Of Smaller Players, Indian Real Estate Is Headed For Consolidation: CLSA Report

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    Driven by RERA and other recent reforms, the Indian real estate sector is headed for some major organizational changes. As per a research report by foreign brokerage CLSA, India’s fragmented property sector is undergoing a transformation with the listed capital-rich companies headed for a better foothold in the industry.

    The report says that the listed real estate companies like  Godrej Properties, Sobha, Prestige Estates, Oberoi Realty, Indiabulls Real Estate, and DLF, which dominate the $100-billion residential-housing market, are expected to gain further in the coming times. Due to the tightening of RERA and other reforms,  the market share of quality players will double up to 20% by FY24.

    “Increased compliance costs and complexity, and greater levels of monitoring will drive non-serious players out of the market,” the report said, Financial Express reported.

    It seems from the report that the weaker, unorganized players of the realty market will be unable to cope up in the coming times. Since Rera mandates putting cash inflow from customers into a managed account, it is the beginning of serious working-capital issues for unorganized players.

    Apart from the RERA reforms, there has been a spur in consumer activity in the cases of developers failing to deliver the projects on time. In the backdrop of non-delivery of homes and punitive action against builders, such as Unitech, JP Infra and Amrapali, there has been a steep increase in the awareness level amongst home buyers who are reluctant to put their money into an unreported developer.

    It seems from the report that RERA has indeed started to fulfill its purpose which is primarily to clean up the property sector. Apart from it, other anti-corruption campaigns like demonetization, the Goods and Services Tax (GST) and the Benami Property Act (2016) have also been instrumental.

    Further, in a note, Foreign brokerage Credit Suisse said that real estate sector’s non-performing assets (NPAs) are likely to rise in the fourth quarter (Q4) as lack of funding from NBFCs adds to the pressure of weak property sales.

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