The Indian Real Estate market is showcasing an optimistic image as the sales volume of the top real estate developers is at an all-time high. This is also reflected in their stock prices and echoed in the finance channels’ newsroom. Post COVID-19, the Indian real estate market is exhibiting a boom, but as you look closer, there is more to the buoyant narrative.
The sector is witnessing a K-shaped recovery. The growth projections for Indian real estate are impressive but disproportionate. Where the larger players are conveniently catering to the humongous housing requirements of the Indian population, whereas the smaller developers are finding it tough to find footing in this competitive market.
According to the recent report published by ICICI Securities, it is estimated that the stock value of the top listed real estate firms would increase from 25% in FY21 to 29% by FY24. This solidifies the concern that the smaller players are yet to benefit from the growth in the real estate market. Many factors can be attributed to this phenomenon:
- They can leverage off from the pool of investors and underwriters at their disposal.
- The levy handsome premium amount
- They have the purse to overcome a bad market phase and hold their inventory.
- They are better equipped to market their product as they boast a larger budget.
- The house owner can also avail of the 20:80 schemes in which the developers bear the interest on the home loans till the time of possession.
- They can also showcase an impressive portfolio which instils confidence in the buyers.
On the other hand, the fly-by-night developers have been under the scrutiny of the media and the public for taking undue advantage of the deferred land payment policy. The policy was drafted to assist and incentivize smaller developers by providing a provision to pay only 10% of the land fee upfront. The rest of the money was to be paid in 10 years or at the time of the project’s conclusion. However, the builders siphoned off the customers’ money from one project to fund another. This resulted in an impending delay in project completion to the point where the entire ecosystem of the Indian real estate was contaminated. Such factors have also resulted in the K-shaped recovery trend of the Indian real estate market.
see also – Property in India after Lockdown: Indian Real Estate
However, it is to be noted that 10-12 major players cannot fulfil the substantial demand and requirements of the Indian population post-COVID-19. Their operations are limited to the major cities in India. And their projects cater to the small upscale consumers present in such metropolitans.
Another important factor stimulating this K-shaped recovery trend is that investors with substantial wealth possess easy access to the funds of all the major financial institutions in India. On the other hand, the small developers are finding it difficult to secure funding for their projects catering to the consumers looking for small, affordable, and low-cost spaces.
A K-shaped recovery trend drives the euphoria surrounding the Indian real estate market. But it is to be factored in whether a handful of major players would be able to satisfy the thirst for housing in one of the largest markets in the world. Post COVID-19, the Indian real market is experiencing an impending boom and record-high demand. But the question is whether the sector is equipped to satisfy it.
