Big fish eat up small fry in realty biz

AHMEDABAD: Increasing costs in realty projects is forcing small builders to stay away from launching new schemes. High land prices and lengthy government procedures for various approvals have prompted smaller developers to work for big realtors on a contract basis. Around 70 builders in and around Ahmedabad who used to do smaller schemes are either out of the business or started working for big realty companies.
In the last six years, cost of realty projects have increased 10 fold due to spiralling land prices, construction material and labour costs have gone northwards.
“Few years back, land owners allowed builders to announce a project after paying 10 per cent of the land cost. He actually used to put his company’s sign board on the land. But now, land owners demand 100 per cent amount,” says Vijay Shah, founder secretary of Confederation of Real Estate Developers’ Association of India (CREDAI), Gujarat chapter.
Take the case of Dinesh Patel, who was in the real estate business for nearly two decades and floated commercial as well as residential schemes at Shahibaug, Ashram Road, CG Road and even in the old city. For the last couple of years he has decided to take government contracts and remained out of realty business.
“Realty projects require heavy investment. If you don’t have holding capacity, there is huge risk as there is intense competition from big builders. Many national players have also launched schemes in Ahmedabad. In such market it is difficult to survive for the smaller fishes against big ones,” said Patel.
Ashish Desai had also completed few schemes in the city including a commercial complex off CG Road. Desai now works as a technical consultant and is also working with few real estate companies. According to him excessive land price is the biggest problem for the developer having lesser capital.
“Corporates like Adani and Arvind have announced massive realty projects. It means there would be more supply and intense competition. The smaller realty firm does not have holding capacity and hence it would have to sale property at lower rate,” said realtor Nilay Shah, who now works with a builder as consultant.