small developers

The common narrative of most talk shows, media articles, and investor presentations suggests consolidation in the real estate market in recent years. The general perception is that demonetization and introduction of RERA and GST compliances have made real estate a business of deep pockets where smaller developers have been or are being acquired by the large developers and there is massive consolidation in the market. However, data from Liases Foras shows a completely different story. 

Affordable housing in Chennai means a unit costing between ₹ 8 and 20 lakh (₹8-10.2 lakh for EWS and ₹16-20 lakh for LIG households), based on the Deepak Parekh Committee’s definition of affordability. In practice, however, state agencies as well as private builders define affordable housing by size, referring to units of 300 to 600 square feet.  This approach has contributed to making most “affordable” housing produced in the city unaffordable to EWS and LIG households.

Smaller buildings and stand-alone houses are a prominent category in the urban scape of Kolkata, where real estate has emerged as the one of the primary modes driving the urbanization process. While large residential complexes within and outside the municipal limit have dominated popular imagination due to the speculation involved in acquisition of larger lands for real estate, there has been less attention on single stand-alone buildings that are being converted to vertical housing in last decade or more. This trend has been driven by a combination of factors that include municipal interventions, the increasing desire of middle classes for vertical housing, and an active market for redevelopment of small plots.

Providing housing that is safe, affordable, and accessible creates vibrant communities around it and a more secure and just world for all. It also contributes to building resilient cities strong enough to withstand adverse environmental conditions and disasters. The COVID-19 induced pandemic has further put a premium on the importance of putting a roof above one’s head.

However, despite the potential and size of the Indian affordable housing market, not many developers have been able to successfully make a sustainable business case out of it. This article analyses the challenges and opportunities for smaller and local developers to expand their footprint in this market, and outlines a framework for its execution.