The Case for Turnaround Platforms: Rescuing Silent Sufferers Lost in Housing Boom

By Sunil Pareek, Chief Investment Officer, Assetz Property Group Mumbai / October 5, 2024: Over the last 3 years, India’s residential real estate market has been basking in a golden era of growth. According to various industry reports, home sales have surged across the country, reflecting rising demand in premium and luxury housing segments. In fact, in H1 2024 alone, residential sales hit an 11-year high with 1.73 lakh units sold, signalling sustained momentum driven by favourable economic conditions and an increasing appetite for premium housing.

The data presents a rosy picture—urban homeownership is on the rise, new project launches are frequent, and developers are riding the wave of success. Yet, as we celebrate this growth, we must ask ourselves: Are we missing out on addressing a critical segment that was the focus just a few years ago?

Stalled Projects

While we are consumed by positive sales data, an underlying issue remains largely ignored—the large number of stalled and stressed real estate projects across India. Pre-COVID, these projects were at the forefront of policy discussions, yet today they have faded from the spotlight. According to raw data analysis, over 1,600 projects remain stalled across Tier I and Tier II cities due to financial hurdles, regulatory delays, and operational challenges.

These projects, which average between 300-350 units each, contribute to a massive backlog of over 5 lakh unsold or incomplete homes. This translates into a substantial inventory, valued between USD 45-50 billion, based on an average ticket size of 1 crore per unit. To put this in perspective, this value is nearly three times the GDP of Mauritius and equivalent to the total market capitalisation of India’s top 15 listed real estate companies as of March 31, 2024. Moreover, this USD 45-50 billion figure is nearly twice the amount of private equity investments in Indian real estate over the past five years.

SWAMIH Fund

Recognizing the severity of the problem, the Government of India introduced the SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund in 2019 to revive stalled projects. To date, the fund has helped deliver over 32,000 units in the affordable and mid-income housing segments—a commendable feat.

However, the fund’s impact is limited by strict project eligibility criteria, such as RERA registration, project size restrictions, and completion proximity. As a result, a large portion of stalled projects, particularly in the premium and luxury segments, remain in limbo, unqualified for SWAMIH’s support.

Learning from the West

While India’s real estate landscape is significantly different from that of Western countries, there are lessons to be learned from advanced economies. In the United States and the United Kingdom, distressed asset platforms and specialised funds have successfully revitalized stalled or underperforming real estate projects. These turnaround platforms combine financial restructuring, operational expertise, and project management skills to transform distressed assets into profitable ventures. India can incorporate some of these strategies while adapting them to the local market’s unique challenges.

Challenges Developers Face

• Financing Issues
• Regulatory Delays
• Land Title/Litigations
• NCLT Process
• Poor Design/Master Plan
• Changing Market Preferences
• Operational Hurdles

These challenges create complexities that are hard to navigate without specialised support, further highlighting the need for dedicated turnaround specialists.

Turnaround Specialists Required 

In a market where stressed projects continue to pile up, one of the main concerns for stakeholders is the lack of alpha returns on the hard work involved in rescuing such projects. While the effort to resolve these issues is substantial, the financial upside does not always reflect the energy invested, discouraging developers from tackling these challenges.

To effectively address this gap, turnaround specialists—experts in finance, project management, and real estate—are required to breathe new life into stalled projects. These specialists can target distressed projects based on geography, project size, developer history, and profitability to ensure successful outcomes. By leveraging their expertise, these specialists can streamline operations, optimise resources, and implement financial strategies to unlock the potential of these distressed assets.

Unlock Stalled Inventory

In light of these challenges, it is clear that India’s real estate market needs more than happy sales numbers to sustain its growth. The stalled inventory is a massive opportunity waiting to be unlocked. It’s time for the industry to step up and collaborate, forming specialised turnaround teams that can address these issues head-on. This will not only resolve the crisis for developers and homebuyers but also provide a much-needed boost to the economy, restoring trust in the real estate sector and contributing to long-term sustainability.