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About 30-40 per cent of small and medium builders are expected to exit the Bengaluru real estate market as they struggle to cope up with the complexity and compliance levels required of their business, an industry player has indicated.
“The complexity and compliance levels in the business have gone up tremendously in the last two years...it does not make sense to be in the real estate business,” said MR Jaishankar, Chairman and Managing Director, Brigade Enterprises Ltd.
He further said, “The small and medium sized developers form about 25 per cent of the Bengaluru’s residential market and they are particularly those who have one or two projects. This segment is expected to be around 60 million sq ft.”
Shobhit Agarwal, MD and CEO, ANAROCK Capital, said “While consolidation has been an ongoing phenomenon for some time, recent mergers, acquisitions and joint developments are underscoring this trend like never before.”
“The residential sector also is seeing a series of disruptions in the last 2-3 years, with revolutionary reforms such as DeMo, RERA and GST remarkably altering the way the real estate business is conducted.
A natural by-product of this upheaval was consolidation, with fly-by-night developers completely vanishing and small players merging with big ones,” he added.
Once the small-to-medium sized companies are out, market share in is likely to change for few companies.
“I think there are quite a few in that 5-6 per cent range. And while 15 per cent may happen after few years, at least we are trying to increase our market share substantially in the next two years though I may not want to put an exact figure,” said Jaishankar. “We will definitely aim to make it double-digit in market share instead of single digit which is now,” he added.
Jaishankar further said at the same time there will be very few opportunities of M&A in real estate because very few are listed or recognised developers.
“But there are many brownfield projects available for which we are not too keen because they come with a lot of issues. So, we are focussing on our own projects as we have enough new projects ongoing and ready to launch. At the same time, greenfield projects, if they are available at the right valuation, we were open to look at it,” he added.
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