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Realty boom: Developers, PEs aim at buying land parcels amid renewed hopes

Comments Off on Realty boom: Developers, PEs aim at buying land parcels amid renewed hopes   |   August 12, 2014    08:04pm   |Contributed by Indian Realty News

BANGALORE/MUMBAI: After a lull of nearly three years, sale of large land parcels is picking up across the country amid a general improvement in sentiment on expectations that the new government will focus on infrastructure development.

Not only developers but private equity (PE) players, too, are keen on joining hands with builders to acquire land parcels at fair valuations without having to pay a premium as corproates try to unbolt the value of their real estate properties, inspiring the realty market out of its trance.

Some of the builders looking for sewing large land transactions include Tata Housing Development Company, Oberoi Realty and Runwal Group in Mumbai, DLF in Delhi, Prestige Estates Projects in Bangalore, VGN Developers in Chennai and Kolte-Patil Developers in Pune. Most of the properties on block are non-core assets, real estate and manufacturing facilities of corporates that can easily be converted to residential or office projects.

“Developers have access to liquidity and are putting war chest together in anticipation of high growth and conducive interest rate,” said Ambar Maheshwari, managing director of corporate finance at property consultancy JLL India. “Such transactions help corporates get money to put into expansion of their core business, while builders get access to clean land that is 30-50% cheaper than the market value.”

In July, Prestige Estates Projects bought an 8-acre prime plot of land in south Bangalore for Rs 345 crore from engineering and electronics conglomerate Siemens.

The deal was preceded by Mumbai-based Lodha Developers buying 87 acre in Thane, near Mumbai, from Clariant Chemicals (India) for Rs1,154 crore and Oberoi Realty’s 25 acre land purchase in suburban Mumbai’s Borivali from Tata Steel for Rs1,155 crore.

A crucial factor like toned down expectations of sellers is also prompting developers to consider deals, which would have otherwise taken longer to conclude.

“With outlook on economy looking positive hereon, we are looking at acquiring land parcels now as values are looking more realistic,” said Sandeep Runwal, director, Runwal Group. He, however, refused comment on the ongoing transaction of Crompton Greaves’ land parcel, for which the developer is believed to be one of the contenders.

Crompton Greaves is looking to sell its 32-acre land parcel in tranches. A stable government that is perceived to be quick in taking firm policy decisions has also boosted confidence of the developers.

“With a stable government in power, we are witnessing slow and steady recovery in the economy and should catch steam with festive season around the corner,” said Brotin Banerjee, CEO and MD, Tata Housing Development Company.

“We believe this is the right time for both consumers and developers to proceed with their purchase decision as these deals may vanish soon. We are utilising this opportunity to increase our footprint of quality land parcels in city centres of major metros as the demand will start picking with improvement in macro economy by end of this year.”

Tata Housing acquired a 7-acre land parcel in Thane from KEC International for Rs225 crore in April. Besides, the developer is looking to invest Rs3,000 crore in acquisition of more land in the premium home category across major cities in the current fiscal.

According to property consultants, over Rs3,100 crore worth of land deals have taken place in the last 6-8 months with similar amount of deals expected to be concluded in the next few quarters. “There is a revived optimism among realty developers,” said Rajeev Bairathi, executive director, capital transactions group & north India at Knight Frank India.

“They know that prices will move upward going forward. Therefore, they are clear about this being the right time to build inventory of the most important raw material for their business — land parcels.”

Source: ET

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