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Supply-Side Consolidation in the Real Estate Industry
Jul 10, 2019

The real estate sector witnessed several headwinds in recent times.

Demonetisation, RERA, GST... all came in its way.

Project delays as well as delays in getting possession have shaken the confidence of home buyers.

And finally, the NBFC crisis struck a massive blow. It sucked out liquidity and brought loan disbursals to a grinding halt.

Due to all these reasons, the number of developers has reduced and this has created consolidation in the market.

Today's chart shows a sharp decline in the number of developers in major Indian cities.

Typically, such a reduction in investment in an industry, i.e. contraction of supply, paves the way for a recovery of profits.

From a supply perspective, the competitive intensity has reduced due to leveraged balance sheets of many developers.

This, in turn, has resulted in subdued launches and stalling of existing projects, thus overall reducing inventory and consolidation in the sector.

With this, the share of organised market players is expected to go up in the medium to long term.

This is a huge opportunity for long term serious players in the sector.

Data Source: ProEquity, Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - Budget an Icing on the Cake for This Smart Money Backed Affordable Housing Stock

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