Synergise To Maintain Balance

Every business and every sector goes through a cycle of good and bad times. The pandemic brought in an insightful combination of times for Real Estate. The residential sales went up, along with the increased demands of warehousing and a focus on healthcare. Simultaneously commercial and retail demands dropped. The overall liquidity in the market was low.

We are increasingly seeing developers which specialize in a specific asset class starting to diversify into other asset classes via partnership. The era of consolidation is being met with the era of partnerships via synergies.?It is helping developers to maintain a balance in their asset classes whereby their cash flows.

Developers are foraying into alternate asset classes like warehousing, data centres, data warehousing, co-living, senior living and co-working. It provides them with mobility and the opportunity to diversify while continuing specializing in their respective asset class. For example:

• ESR, a Hong Kong and Singapore-based logistic developer, partnered with Lodha, a Mumbai-based Luxury residential developer in a 50:50 joint venture of USD 100 million in Thane.
• Also, it partnered with GMR, a subsidiary of GHIAL in a 70:30 joint venture to develop a 66-acre logistics and industrial park at the Hyderabad airport city.
• Godrej Properties, a Mumbai-based property developer partnered with Solitaire, a Pune-based developer to develop 300 acres of residential apartments in Pune
• Century, a Bangalore based residential developer partnered with Godrej Fund management for a 2.4 mn ft commercial project in Bangalore via a forward sale

The takeaway lesson from the pandemic is that businesses need to keep themselves flexible towards the various cycles. It has generally been that the residential and commercial cycles have moved in opposite directions. Partnerships and synergies allow developers to continue to specialize in their respective product lines while continuing to diversify.

While specialization will continue to be the way to go forward, consolidation and synergizing will help in insulating from business cycles and maintain a cash flow balance. This will also lead to a growth in alternate classes in the market.?