Buyers find branded developers safer bet amid covid uncertainty2 min read . Updated: 03 Oct 2020, 06:26 AM IST
- According to India Ratings and Research, tier-1 developers in the top six cities increased their market share from 8.1% in March 2018 to 13.7% in June, up 560 basis points.
- Branded players stand to gain at a time when housing sales are gradually making a recovery
Govind, 35, an advertising professional from Mumbai’s Chembur, booked an apartment three years ago. The under-construction project in Navi Mumbai was being developed by a local builder. He was to take possession this August, but the covid-19 crisis has derailed his plans.
“When I asked the builder, he told me that because of disruptions caused by the pandemic, they couldn’t complete the construction on time."
“The builder had said he will let me know about the revised possession timelines after the lockdown is lifted. Since then, I have asked him repeatedly, but he has not responded."
Govind is not alone. Homebuyers’ experience with local developers amid the covid crisis has not been encouraging. And, this seems to have helped branded players to expand their footprint in the residential segment.
According to India Ratings and Research, tier-1 developers in the top six cities increased their market share from 8.1% in March 2018 to 13.7% in June, up 560 basis points. One basis point is one-hundredth of a percentage point. It said consolidation among residential real estate companies is accelerating, with recognizable brands such as Puravankara Ltd, Sobha Ltd, Godrej Properties, Prestige Estates Projects and Oberoi Realty, gaining at the expense of smaller builders.
“We are seeing bipolar behaviour in the residential real estate sector," said Vivek Jain, corporate ratings, India Ratings. “We have a stable outlook for tier-1 players with a strong brand image, execution activity and reliable access to funding lines. These are the typical characteristics of tier 1 players. With fringe players, our outlook is negative and, since February, we have seen a consolidation theme playing out where the big become bigger and the small smaller."
In April-June, demand crashed across the board, and pre-sales of tier I players fell 22% year-on-year, compared with the 61% drop in the overall residential market, indicating that a flight to safety among buyers had already begun.
“It’s difficult to say now whether tier-1 players will acquire these fringe players; developers are becoming cautious, but if good projects are available for acquisition, they may get picked up. But I don’t think this will pan out in an aggressive manner," Jain said.
Branded players stand to gain at a time when housing sales are gradually making a recovery. India’s top seven cities registered sales of 29,520 units in July-September, against 12,730 units in April-June, shows data from Anarock Property Consultants.
Although sales were still lower than the 45,200 units recorded in January-March, the past three months saw buyers returning to the market. The demand revival is also visible in the number of new launches. Around 32,530 new units were launched in July-September, far higher than the 1,390 units in April-June.