Sluggish Indian realty spells boom for Godrej Properties

By Staff Writer

Apr 12, 2016 08:48 AM EDT

Adverse conditions in India's real estate sector have turned to be favorable for Godrej Properties. The sluggish sales in the domestic real estate market and the latest approval of regulatory bill are making way on more acquisitions for Godrej Properties. It is now investing heavily to cash in on available opportunities in an otherwise sluggish real estate market.

Newly passed regulatory bill is forcing smaller developers out of the realty business in India. The new regulatory bill envisages more disclosures from developers and penalizes them for any lapses in contracts. Smaller real estate companies find it difficult to promote sales and are suffering from unsold inventory. Small players are also facing lack of funds and unrealized revenues from sluggish sales. 

Bloomberg reports that Godrej Properties is among few major developers who're sailing through rough weather conditions in Indian real estate segment. Consumers and business firms are going by brand names as the timely completion of projects is very important in the real estate sector. Pirojsha Godrej, who manages Godrej properties, is upbeat as pain in Indian real estate sector is generating more opportunities.

Pirojsha, son of Indian billionaire Adi Godrej, Chief Executive Officer of the third largest developer in India, said "Conditions aren't going to get any better than this. There is some amount of distress with many banks taking over projects, some of the promoters have lost control of their companies. We have a strong ability to invest capital at this point and we are very happy with our sales in a weak market."

LiveMint further adds that Godrej Properties sees the current year as the best ever year for new project acquisitions. Sluggish sales and the newly passed regulatory bill keep smaller players away from the real estate business. Godrej forecasts that only few hundreds of few thousand developers will only survive in the wake of the new regulatory bill. Residential sales are expected to double in the quarter ending December 2015.

Godrej further said "Weaker developers are facing a harder and harder time both in terms of accessing customers and capital at reasonable costs. With the real estate bill coming in, it will only increase pain for them."

Considering the growing demand for housing, Godrej Properties in November 2015 launched the first phase of housing project 'The Trees' with 374 units. It's upbeat on revenues from the second phase of the project that launched in March 2016. There is and estimated INR 700 crore revenues from the second phase of housing project in Mumbai. Godrej Properties has recently entered Noida market as well. It recorded encouraging sales volume during the three quarters of financial year of 2015-16, as reported by The Economic Times.

Generally, Indian developers pre-sell homes to buyers at lower prices before obtaining approvals. Pre-sales give developers the required funds for land acquisition and complete other projects as well. With the new law in force, developers are allowed to sell property after its completion only. It also requires getting all the approvals before selling the property. Developers have to use 70 percent of funds to finish project and this requires lot of funds without any pre-sales.

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