Live Markets »News & Advice»Company News»Company News Details
Company News Details

Brand-name realtors snap up languishing projects, stressed assets

Pavan Lall/ 09 Nov 18 | 04:55 PM

In stressed realty markets such as the National Capital Region and Mumbai, big players are going for outright land acquisition, joint ventures, and joint development agreements, as liquidity from non-banking finance companies for the sector dries up. The environment for consolidation is optimum as the sector was already reeling from the effects of demonetisation and implementation of the goods and services tax (GST) as well as the Real Estate (Regulation and Development) Act, 2016 (RERA).

Leading the wave of consolidation are a list of the projects Godrej Properties has entered into in recent months: 1. A 1.7-million sqft housing project in partnership with Ace Group; 2. A 2.2-million sqft project in Noida Sector 43 with Shipra Group; 3. A 700,000 sqft residential project on Ghodbunder Road in Thane through an outright land purchase from unnamed sellers; 4. A 100-acre land parcel for development near Devanahalli in north Bengaluru as a JV with Sai Srushti Group.

Related Stories

    No Related Stories Found
Widgets Magazine

Recently, Sunteck Realty also launched Sunteck Westworld, a 100-acre project with apartments priced between Rs 2.5 million and Rs 5 million. It had acquired a project in Naigaon from Unicorn Developers in a deal that included a revenue-sharing agreement of 25 per cent of the top line, Sunteck's officials said. Shapoorji Pallonji has also tied up with Nirmal Lifestyle.

These acquisitions and JVs are not only in the residential segment, but also in the commercial, retail, and co-working spaces. And, pure developers are not the only ones looking out for opportunities. 

According to Anarock's research, a number of private equity deals have also been struck.

ALSO READ: Get a grip on the grey areas before you purchase real estate abroad

For instance, Xander Group's retail arm, Virtuous Retail South Asia, is close to acquiring a retail project in Mumbai from Omkar Realtors & Developers at an estimated cost of $280-$325 million; Blackstone acquired Indiabulls' Chennai commercial property for $123 million; and Japanese conglomerate Mitsubishi invested $25 million in Bengaluru-based Shriram Properties for an ongoing residential project.

Analysts tracking the industry claim Bengaluru-based developer Prestige Properties is also in talks with realty firm Nirmal Lifestyle for tie-ups. Irfan Razack, chairman and managing director at Prestige Group, said while talks were indeed on with Nirmal Lifestyle, the deal had not been formalised.

Ramesh Nair, chief executive officer of property management consultancy Jones Lang LaSalle, said there was a reason why only a few companies are leading the race. "Most of the large real estate companies have actually focused on getting their own houses in order and haven't been able to take advantage of the opportunities in the market," he said.

His peers agree. Unscrupulous developers will either perish or merge with the big names, said Anuj Puri, chairman Anarock Consultants.

He claimed lending to the sector had reduced from 68 per cent in 2013 to 17 per cent in 2016, and other sources of funding such as private equity (PE), financial institutions, and pension funds have gained more prominence.

"However, PE players are being exceedingly cautious and are investing only in squeaky clean projects. Players whose projects do not qualify are therefore hit hardest by the liquidity crisis," said Puri.

ALSO READ: 78% NRIs in ANAROCK survey say real estate tops investment options in India

Sahil Vora, Managing Director of real estate consultancy company, SILA, said players such as Sunteck have managed their risk profile smartly by scouting for deals, raising money when the market was hot and keeping their powder dry for the right buy. "But, overall consolidations should have been moving at 10 times the pace. That hasn't been the case because the realty NBFCs kicked the can down the road."

So what are realty firms looking for when they take on stressed assets?

Kamal Khetan, Sunteck Realty's chief executive and managing director, said he looks at untapped potential in addition to the obvious factors such as high growth location, easy connectivity and clean titles.

As far as the financial side is concerned, Sunteck evaluates deals with a minimum potential value of about Rs 10 billion when complete. "There will be at least a few hundred projects that will come up for restructuring in the next few months across metros such as Delhi and Mumbai," he added.

As for its pros, the overall hope is consolidation will eventually benefit consumers. "They will get better products without excessive delays, and there will be less risk on their investments," Puri said.

The rules of the game will also see some changes.

Vora said any player wanting to see stable business will need the balance sheets, the customer confidence, and the overarching brand heritage. We may soon see a revamped pecking order.

"We are likely to see a new set of dominant real estate players emerge after the wave of consolidation that will continue for at least a couple of years," Khetan said.

Widgets Magazine


Company Price Gain (%)
H D F C2,343.852.52
Kotak Mah. Bank1,537.600.31
HDFC Bank2,403.900.26
Bajaj Fin.3,466.350.14


Currently No Poll Available.

Online Portfolio

You can create Online Portfolio here using the below button.

Widgets Magazine