The Developer Business Model

How Indian real estate developers make money by buying land, getting approvals, building and selling units, and why the business is capital-hungry and risky.

A developer turns land into homes or offices and sells or leases them.

The steps

Buy or partner for land.
Get approvals from local authorities.
Launch and pre-sell units.
Build over several years.
Hand over to buyers.

Money flows

Big upfront costs for land and approvals.
Revenue comes over years as buyers pay in instalments.

Risks

Delays in approvals or construction.
Price falls during the project.
Interest costs on borrowed money.

Margins

Profitable projects can earn good margins, but one failed project can sink a small developer.

Economic role

Real estate and construction are among India’s largest employers.

The mid-sized builder

A Pune developer buys a plot, waits a year for approvals, launches 200 flats and uses buyers' instalments to fund construction.

Thinking developers just build and sell quickly

Projects take years and carry big risks.

Key takeaways

Developers buy land, get approvals, pre-sell and build.
The business needs lots of capital.
Delays and price falls are key risks.
Construction is a major employer.