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Consolidation of the Indian Realty Industry: The Road Ahead

Shobhit Agarwal

Shobhit Agarwal, Managing Director – Capital Markets, JLL India

The government’s demonetization move is bound to lead to further consolidation in the overcrowded Indian real estate industry. This move has already started affecting demand for developers who preferred unaccounted money, adding to their liquidity woes. Debt-laden developers, who have been gearing up for bigger cash crunch with the implementation of Real Estate (Regulation & Development) Bill or RERA, now have demonetization to add to their woes.

The move has already started affecting demand for unscrupulous developers. In the longer term, these two steps taken by the government will indeed transform the overall image of the Indian real estate sector. In the interim, however, the overcrowded Indian real estate industry is set to see consolidation activity pick up pace. The three ways through which consolidation will be seen are:

  1. Developers / landowners finding development/marketing partners in large, reputable developers though the Joint Development (JD), / Joint Venture (JV) / Development Management model
  2. Smaller developers being absorbed by larger developers
  3. Cash-starved developers monetising their land bank by selling it to cash-rich / opportunistic developers

The first option is largely dependent on developer reputation and marketability. We have seen various such partnerships being created over the past few quarters. Some examples are:

Landowner Development Partner Area (acres) City
Ace Developers Godrej Properties 100 NCR
Vihang Group Godrej Properties 15 Mumbai
Lotus Green Godrej Properties 36 NCR
Neptune Group Tata Realty 10 Mumbai
Omkar Realtors Shapoorji Pallonji Real Estate 16 Mumbai
IREO Hines 10 NCR
Eros Group Bharti Realty 40 NCR
Logix Group ATS Builders 35 NCR
Lotus Green Tata Housing 37 NCR
BU Bhandari Builders Prestige Group 800,000 sq ft Pune
Rohan Lifescapes Radius Developers 150,000 sq ft Mumbai

Source: JLL Capital Markets Research

The latter two, on the other hand, would showcase the power of capital. The purchasing power of every Indian rupee or US dollar will increase and money will move in the direction of good quality land banks – Grade-A locations, followed by Grade-B locations. We have already witnessed a few instances of developers’ monetising their land parcels by selling them to their competitors.


Outright Sale
Seller Buyer Area (acres) City Amount (INR crore)
Sahara Group M3M India 185 NCR 665
Parsvnath Developers Supertech Limited 140 NCR 1,211
Ramprastha Group Vatika Group 75 NCR 300
Windsor Realty Kanakia Spaces 2.5 Mumbai 125
M3M India Tata Realty – Standard Chartered JV 25 NCR 500
Windsor Realty Wadhwa Group 6.5 Mumbai 208
Skyline Group Kanakia Spaces 500,000 sq ft TDR Mumbai 400

Source: JLL Capital Markets Research

While the consolidation is undeniable, the pace of it will depend on the quantum of equity infusion by the larger PE investors and the strategy adopted by foreign developers who may enter. A few have already entered India and are in the process of setting up their base with a long-term view.

Fosun International, a Chinese conglomerate, has revealed its plans to invest up to USD 1 billion in India, whereas developers such as the Dalian Wanda Group (looking to invest USD 10 billion) and China Fortune Land Development Company (signed a Memorandum Of Understanding (MOU) with the Haryana Government to develop large-format industrial parks) are tying up with state governments to set a base for large-scale development.

A few investors/developers may opt to take the plunge in this market straight away (like Macquarie and Fosun) and a few might prefer the wait-&-watch approach, but we believe the industry is set to consolidate in the next five years. By 2021, we will see larger players consolidating their positions even further while the number of smaller players will reduce considerably. In both cases, equity investment or the lack of it will play a deciding role.