When can we see consolidation in the Indian real estate industry in major way and how bad/how good will it be?

The past few years have witnessed real estate being battered by the Tsunamis of economic, taxation and industry policy reforms. This resulted in a serious liquidity crisis which left many projects limping and stalled due to choking of last mile funding. The Covid 19 pandemic was the last nail in the coffin which practically brought the sector to the grind halt. The beleaguered sector was reeling under liquidity, labour and raw material scarcity technically leading to fall out of over leveraged players. The scene was about the survival of the fittest that can deleverage its debt and roll over its working capital to fuel the production. Though, government announced fiscal stimulus and measures to restart the economic engine, but it could hardly salvage the positive balance sheet turning negative and ultimately a NPA.

All these detrimental factors led to consolidation trend in the real estate sector as a matter of survival. It is an on-going process where the branded and corporate real estate companies with proven track record and healthy financial status are in the stage of ‘cherry-picking’. As the growth story of Indian economy is written from the perspective of ‘mission restart’, a leading chapter which will be written will be about consolidation. The challenge so far is valuation of stalled and delayed projects; numbers as regards consolidation will rise exponentially once mutually acceptable parameters for valuation are accepted. Consolidation will be the best way out for a liquidity strapped industry and it is just a matter of time before the quantum gets enhanced.