Turbulent Markets for Real Estate Developers

Turbulent Markets for Real Estate Developers | Insights Success

Real Estate Developers are facing challenging times as markets have become volatile. Developers need to keep working on asset creation with prudent financial management that has a long-term value proposition for the customers and investors. The projects are stagnant because of dislocated and untimely allocation of resources in early phases. Housing developments have descended by at least 75 percent and overall housing projects have decreased by at least 40 percent. Demonetization move and GST impact later that year are likely to benefit the real estate sector in the long run. But in the short term, it will struggle to come out of its impact.

Project Planning for Developers

Developers in the real estate sector have to transform their way of working and take risk of investment by proper project planning. Selection of the city is important and if a city is not represented online sufficiently it indicates that the customers are not serious about development. Developers are also required to communicate with the planning department for information on and the process of getting the upcoming project. The planning process may involve getting multiple approvals and if the departments are inaccessible and do not have online system developers they can expect extended timelines for the project completion. Taking feedback from local operators in the real estate markets like contractors and agents can also be a good choice to sense the trends. The environmental issues and neighborhood groups involved can create roadblocks in executions of even a well-planned project. Delayed projects will eventually increase holding costs for the developers.

Legislative changes, transparent structures and professional way of working, fund management are some of the recent developments in the real estate sector that developers need to consider in their future planning decisions.

Professionalism through Legislative Route

RERA Act 2016 has made the documents related and administrative processes much more rarified and transparent. Real estate sector has adopted a professional outlook towards the working system. The market is fast becoming a buyers’ market boosting the need for correct information channels. With the concentration of foreign investment behind projects, developers are using the information technology solutions to ensure that the information is available readily all over the globe. Regulators like Real Estate Regulatory Authority housing developers are now aiming their attention on finishing their current projects.

Transparent Ownership Structures

One of the most common ways of money laundering is the investment in luxury properties through shell companies. Almost half of the properties, especially true for highest priced properties, are held through corporate structures that hide the owners. Such structures are used to support illegal activities and illegitimate uses have overtaken legitimate uses. Bringing transparent ownership structures is an essential element to stop underlying corruption, drug trafficking, and other crimes that are the source of the invested funds.

Rising Collaborations

Real estate developers were facing sales crunch and struggling to stay solvent and many of them went bankrupt due to lack of profitable projects or completed projects. The market is getting consolidated with many heavy players joining hands and collaborating to combine their resources. Mergers and acquisitions, joint ventures between real estate developers and collaborations between developers and landowners are various ways of consolidation appeared in the market for last few years.

Free Flow of Foreign Funds

Earlier, Banks in India were reluctant to lend money to the real estate businesses. The profit earning schemes launched by developers were not getting results as predicted. Consequently, real estate businesses sought other sources of funds like private equity funds and pension funds. In fact, during the last four to five years the sources of non-institutional funding have steadily increased to 75 % of the market. Foreign investors are willing to enter the Indian real estate market which has a high potential but the finance-deprived potential.

Affordable housing is bound to continue as per the policies of the government with low-cost housing units constructed that can be inhabited by the low-income portion of the society. Market improvements will depend on how demand and supply factor comes up and how regulations are implemented.