Realty market looks at an upswing, ancillary industries hope for a revival
Interiors, flooring, home security systems companies rely heavily on the real-estate business. A boom or slowdown affects them too.real estate Updated: Mar 24, 2018 18:19 IST
Elevators, architects, furniture, security — they sell better if realty sells. And in a time of relative stasis for the real-estate sector, these businesses are among those looking forward to an uptick.
Between 2013 and 2016, new launches consistently outstripped demand, though the gap narrowed from 146,000 units in 2013 to 11,000 units in 2016, according to data from consultancy firm Anarock Property.
Since 2016, things have been improving. Residential unit sales across India’s top six cities — Mumbai, Bengaluru, Chennai, Delhi-NCR, Hyderabad and Kolkata — outstripped the number of units launched by 5%. After a spell of stagnancy, issues following demonetisation, a cash crunch and project delays, an uptick combined with greater transparency and discipline as a result of the new Real Estate Regulatory Authority hold promise.
“There are two aspects — original equipment manufacturing (OEM) and maintenance and replacement,” says Niranjan Hiranandani, president of the National Real Estate Development Council. “Though the second continues regardless of any slump, the OEM segment does get affected. There’s less demand from developers, they ask for greater discounts and a longer credit period, resulting in losses.”
The elevator industry is the first to be affected in a realty slowdown, says Rajul Manek of Messe Frankfurt, a company that organises global trade fairs and hosted the International Elevator and Escalator Expo earlier this month.
Vincent Pinto, senior vice-president for new installation business at Schindler India, would agree. “The realty market is the primary driver for the elevator industry and our volumes are directly proportional to the number of new projects sanctioned,” he says. “We saw a slowdown following demonetisation and then the introduction of GST. Things are now slowly picking up.”
During demand slowdowns, manufacturers say they refocus their marketing teams to get more business from the Asia Pacific region, since it is currently the biggest market globally.
For Otis India, the residential sector accounts for 80% of demand. “The residential sector is slowly picking up now, so that’s good news,” says Sebi Joseph, India president for Otis.
“The past three years have been tough,” says Satinder Chawla, managing director of flooring company Span Floors. “Just before demonestiation, we felt the markets had overcome the slump and were picking up. However, coupled with GST, it slowed again.”
One part of interior design firm called Imagination Inc, designs show flats, clubhouses, lobbies and any other common areas for developers.
“This vertical is completely dependent on the realty industry as a boom or a slowdown affects the sums that a developer is willing to spend on the customer experience,” says founder Shriya Kolte.
Even businesses that started out being retail-driven — like home security systems — have become increasingly dependent on the realty segment. “Security solutions such as video door phones (VDP) have become a standard accessory offered by most developers,” says Manoj Khadkikar, business unit head at security systems company Zicom. “So the realty market’s health affects our home VDP business even though this is a very small portion of the overall security solutions market. Delays in realty projects have led to longer sales cycles and an increased investment of working capital. Let’s hope RERA can turn things around.”
A lot of hope, in these allied industries, is pinned on how realty developers will respond to the Real Estate Regulatory Authority.
Chawla of Span Floors feels RERA’s demand for timely completion could benefit consumers and allied businesses. “A delayed project in a builder’s hand is a dead investment and doesn’t generate revenue for anyone,” he says.
Kolte of Imagination Inc says the change has already begun. “Developers are clearer about their budget and timelines,” she says. “With possession dates declared in many cases, there is more discipline already.”