New Approach by Indian Developers
Indian developers are now emphasizing comprehensive feasibility studies for projects before launching them. This move aims to avoid the mistakes that led to the real estate downturn in 2009. They are sending a clear message: market speculation will no longer be tolerated. Instead, the focus will shift to developments that cater to buyers rather than speculators.
Strategic Measures
In a sector traditionally dominated by family-run businesses, developers are implementing several new strategies. According to property consultants, these include:
- Entering into strategic alliances for labor and raw materials
- Appointing project management consultants
- Outsourcing construction work to expedite delivery
Expert Insights
Aditi Vijaykar, Executive Director (Residential) at Cushman and Wakefield India, notes, ‘Builders are making a comeback, but not aggressively. They are exploring new locations and testing products before launching them.’
DLF's New Strategy
India’s largest developer by market value, DLF, has announced it will not buy land in the current year or the next. The company will also refrain from launching new projects without regulatory approvals. DLF’s working capital model will depend on cash flow from pre-sales, customer advances, and bank debt. While stopping speculative buying is challenging, implementing a system such as one home per family is necessary.
Feasibility Studies and Funding
The realty sector is now conducting feasibility studies on home sizes and pricing to ensure the right profile for its projects. This was rarely done in previous years. Developers are also looking at Special Purpose Vehicles (SPVs) or joint ventures instead of outright land purchases. Real estate firms are raising money through Initial Public Offerings (IPOs), aiming to use funds for ongoing and proposed projects or to retire debt. This differs significantly from the approach in 2006 and 2007, when making money was the primary goal.
Parsvnath Developers' Plans
Parsvnath Developers plans to construct around 45 million square feet of space in the next 24 months, building around 1.25 million square feet in the last quarter. The need for developers to ensure a rational profile for their projects is emphasized by Ramesh Jogani, Managing Director and Chief Executive of Indiareit Fund Advisors. Jogani suggests avoiding towering structures like 30 to 40-story buildings and instead offering mid-range quality products.