Project-level Consolidation on the Rise
While consolidation has been an ongoing phenomenon for some time, recent mergers, acquisitions and joint developments are underscoring this trend like never before. The Indian residential sector saw a series of disruptions in the last two to three years, with revolutionary reforms like DeMo, RERA and GST remarkably altering the way real estate business is conducted. A natural by-product of this upheaval was consolidation, with fly-by-night developers completely vanishing and small players merging with big ones. “Just when this consolidation phase seemed to have run its course and the business seemed to have regained an even keel, there was another series of shocks for the sector – the credit squeeze by banks, followed by the NBFC crisis in late 2018. With previously available financial channels freezing funds to developers, even big players were impacted, and the marketplace was left littered with delayed or stalled projects across cities. This triggered a new wave of consolidation and diversification, though this time restricted to the level of projects rather than players.” Shares Shobhit Agarwal, MD & CEO - ANAROCK Capital. According to ANAROCK data, as many as 5.6 lakh units worth INR 4.5 lakh crore currently are stuck or delayed across the top 7 cities. Dearth of funds and lack of management capabilities are the main culprits, but stakeholders realized that many obstacles can be overcome by joining forces with stronger peers and leveraging mutual strengths. More and more cash-starved developers turned to organised and financially-sound players to take over stuck projects by ways of JVs, land monetisation and development management contracts across the major cities.
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