Market slowdown proving to be a boon for organised developers

Despite the sluggish market, organised developers are expanding their footprint by buying more land parcels to increase their market share. It seems like a good time for them to buy land and launch projects in the second half of the FY 2015-16, thereby cutting construction costs. Let’s take a closer look at how established developers are making the most of the market slowdown.

According to a recent report by Kotak Institutional Equities Research, organised developers saw a 14 per cent growth in the value of their total sales during the quarter ending September 2015, as compared to the same period a year ago. For instance, Godrej Properties sold Rs 1,480 crore worth of office space during the quarter. HDIL added Rs 200 crore of sales in its residential segment. Meanwhile, organised developers in Bangalore are ruling the charts.

As per findings by Kotak Institutional Research, developers in Bangalore sold more area during the quarter Jul-Sep 2015, as compared to the preceding quarter. Prashant Nath, Associate Vice President, Veez Capital says, “The Digital India campaign has led to tremendous growth in the city. An increasing number of start-ups are shifting base to areas in and around Bangalore.” In addition, leading developers including Oberoi and Indiabulls Real Estate recorded a dip in net debt during this period.

Increased private equity investments and buyer’s trust and confidence in established developers has propelled their growth in the sluggish times. “Improved sales for many organised developers are a result of increased investment by private equity firms,” elaborates Nath. In fact, the dull market is proving to be a blessing in disguise for organised developers across the country.

Under the uncertain times, buyers are adopting a cautious approach and are preferring to stick with less risky investment options available mostly with the organised developers. This is evident from the fact that many among these continued to gain market share during the quarter ending September 2015. On the other hand, new or unorganised developers are likely to exit the market or scale down during a period of inactivity.

According to another report by property research firm Liases Foras, residential sales in top eight metros registered 17 per cent growth in Jul-Sep 2015, as compared to the same period a year ago. Residential sales scaled up in the last quarter as improved sentiments led more buyers to finalise deals on the assumption that the market has bottomed out, explains the Liases Foras report. Repo rate cuts and subsequent reduction in home loan interest rates have also positively impacted the end-user offtake, say experts.

Article by: 99acres.com