-Abhijit Verma, MD, AA Holdings
The past decade in India has been characterised by businesses who are giving wings to small entrepreneurs, individuals and other service providers through an umbrella platform. From e-commerce to cab aggregators and home service providers, the aggregator model has played a pivotal role in giving larger market access to small businesses and individuals while organising the unorganised. This can also be a shot in arm for the Indian real estate industry which by tapping into land parcels held by small landowners across the country, could unlock immense opportunities for them and the industry.
According to global property consultant Colliers International, the supply of industrial real estate declined 24% over the last 6 months across 5 cities to about 11.8 million square feet in the first half of 2022, thereby opening up a window of opportunity for local players.
This, however, is just tip of the iceberg as the economy is in the process of making a shift from being agrarian based to becoming manufacturing and services based. Reports state that the combined share of manufacturing and services sector in the country’s Gross Domestic Product stood at nearly 50% in 1952 which has increased to 80% currently with the agriculture sector contributing roughly 20%. This shift necessitates the development of infrastructure, and a shift in land use from agriculture to commercial, industrial, and residential. Land that was earlier used for farming, is now being used to set up industries, power plants, manufacturing units, build roads, housing, and shopping malls.
However, several related issues including non-availability of encumbrance free land, unclear land titles, and lack of transparency in real estate transactions are plaguing the sector often being a key factor. This, coupled with fragmented land ownership in India further makes it difficult to unlock the potential tapped into these land parcels. As per the latest information available from Agriculture Census, land ownership in India is significantly fragmented with the average size of operational holdings having decreased from 2.28 hectares in 1970-71 to 1.84 hectares in 1980-81, to 1.41 hectares in 1995-96 and to 1.08 hectares in 2015-16, necessitating the need to establish an efficient system to bring together small landowners and formalise the transactions.
Through efficient land optimisation, the sector will witness the rise of the 3S namely ‘Structure, System and Specialists’ which will drive change across unorganised as well as established real estate sector players, to unlock and capitalise on the optimal potential of the assets in hand. As India looks forward to becoming a $5 trillion economy, this initiative can be viewed as air beneath the wings.
Furthermore, courtesy of having the seventh largest landmass in the world, the land use is also quite diverse which spells the need for custom made solutions to bring together small landowners and solve their unique pain points using technology. Reliance on customised solutions and employment of well-planned structure, system and specialists is the most effective way to unleash the full potential of this industry, thereby leveraging the knowledge of local landowners/ aggregators, who are well versed with regional specific land complexities and characteristics, acquired over several years, and empowering the already established players in the industry to optimise their capital in hand, is the way forward.
This is an opportune time for India to empower the aspirational unorganised sector and the established enterprises of the real estate with capabilities that would not only propel them to succeed individually, but also drive the industry to blend in the fastest growing economy with positive impact on employment generation, world class infrastructure creation and move into developed economy.
Source: Construction Weekonline