In all the talk about globalisation, being local does have a bad name. But as per B&E’s analysis, regional centres are teeming with realty potential. And regional players are proving that staying local could actually prove to be a blessing in disguise
Media and Real Estate – the two sectors may be largely antipodal to each other in terms of business dynamics, but there is a lot that the latter can learn from the former. You may be wondering what? Consider this: Globally, print media (to be specific) has invariably been a regional industry. So there is The New York Times dominating in New York and The Los Angeles Times, which is dedicated to LA. In India too, regions have their own unique favourites – The Hindu in Chennai, Deccan Herald in Bangalore, The Hindustan Times in Delhi, The Telegraph in Kolkata, Tribune in Chandigarh, et al. Attempts by most of these dailies to go national have not been so fruitful. Similarly, it is being observed that real estate players operating out of specific regions of the country like Jaipur, Hyderabad, Kolkata, Kochi, Chennai, et al, are showing spectacular growth. What is the basis behind this trend, and is it sustainable? B&E finds out.
The broad figures are hardly regional, as the Indian real estate sector contributes around 14-15% to the GDP of the country. The construction business’ contribution to the GDP stood at 7.95% in 2002-03 and spiralled to 16.46% by 2005-06, before showing a downward trend then onwards (t stood at 11.98% in 2006-07; 9.81% in 2007-08; and 7.24% in 2008-09). The real estate business forms over 60% of the total construction business of the country. The last 24 months have been a tough ride for national real estate players. Huge debts riding on their backs, stalled construction and instability in the global real estate market further added to the woes of the Indian realtors. Hovering at 12,727.42 points in December 2007, the BSE Realty index had plummeted to 1561.01 points by November 2008 – a drop of 87.73%, before rising up to 3361.10 as on March 15, 2010.
In the second quarter of 2009, debt liabilities on national realty players like DLF and Unitech stood at Rs.150 billion and Rs.78 billion respectively. But the downturn hit them hard as the cost of construction sky-rocketed. Sample this: for the quarter ending December 2009, the cost of construction for DLF stood at Rs.6.73 billion – a mind-numbing increase of 262.75%. Even for Unitech, the cost of construction increased by 197.57% over the last year to Rs.4.47 billion. For Parsvnath Developers, the cost of construction increased by 173.75% yoy to gross Rs.1.29 billion currently. Increase in the excise duty from 8% to 10% will further add to the woes. High property rates led to decline in sales (by almost 50-60%) and national developers were forced to stall projects. Before the slowdown struck, big developers had hastily acquired land all over India to increase their land banks. Currently, DLF has a total land bank of close to 430 million square feet, of which, only 50 million square feet is under construction. Also, a lot of space acquired for launching commercial hubs could not be developed because of a slowdown in the big ticket IT/ITeS sectors.
Media and Real Estate – the two sectors may be largely antipodal to each other in terms of business dynamics, but there is a lot that the latter can learn from the former. You may be wondering what? Consider this: Globally, print media (to be specific) has invariably been a regional industry. So there is The New York Times dominating in New York and The Los Angeles Times, which is dedicated to LA. In India too, regions have their own unique favourites – The Hindu in Chennai, Deccan Herald in Bangalore, The Hindustan Times in Delhi, The Telegraph in Kolkata, Tribune in Chandigarh, et al. Attempts by most of these dailies to go national have not been so fruitful. Similarly, it is being observed that real estate players operating out of specific regions of the country like Jaipur, Hyderabad, Kolkata, Kochi, Chennai, et al, are showing spectacular growth. What is the basis behind this trend, and is it sustainable? B&E finds out.
The broad figures are hardly regional, as the Indian real estate sector contributes around 14-15% to the GDP of the country. The construction business’ contribution to the GDP stood at 7.95% in 2002-03 and spiralled to 16.46% by 2005-06, before showing a downward trend then onwards (t stood at 11.98% in 2006-07; 9.81% in 2007-08; and 7.24% in 2008-09). The real estate business forms over 60% of the total construction business of the country. The last 24 months have been a tough ride for national real estate players. Huge debts riding on their backs, stalled construction and instability in the global real estate market further added to the woes of the Indian realtors. Hovering at 12,727.42 points in December 2007, the BSE Realty index had plummeted to 1561.01 points by November 2008 – a drop of 87.73%, before rising up to 3361.10 as on March 15, 2010.
In the second quarter of 2009, debt liabilities on national realty players like DLF and Unitech stood at Rs.150 billion and Rs.78 billion respectively. But the downturn hit them hard as the cost of construction sky-rocketed. Sample this: for the quarter ending December 2009, the cost of construction for DLF stood at Rs.6.73 billion – a mind-numbing increase of 262.75%. Even for Unitech, the cost of construction increased by 197.57% over the last year to Rs.4.47 billion. For Parsvnath Developers, the cost of construction increased by 173.75% yoy to gross Rs.1.29 billion currently. Increase in the excise duty from 8% to 10% will further add to the woes. High property rates led to decline in sales (by almost 50-60%) and national developers were forced to stall projects. Before the slowdown struck, big developers had hastily acquired land all over India to increase their land banks. Currently, DLF has a total land bank of close to 430 million square feet, of which, only 50 million square feet is under construction. Also, a lot of space acquired for launching commercial hubs could not be developed because of a slowdown in the big ticket IT/ITeS sectors.
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