Low de­mand for land lead­ing to deals at dis­counted rates

DE­CLINE Bar­ring a few prime lo­ca­tions in Mum­bai and Delhi, land trans­ac­tions have slowed in the last few years

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Bidya Sa­pam bidya.s@htlive.com n

MUM­BAI: Land deals are be­ing struck at rates lower than or the same as five years ago, bro­kers, builders and real es­tate con­sul­tants said, as lower res­i­den­tial de­mand from end con­sumers and high lever­age among de­vel­op­ers ease pres­sure on land.

There are few tak­ers for large plots and de­vel­op­ers are mostly opt­ing for joint devel­op­ments with land own­ers.

Bar­ring a few prime lo­ca­tions in Mum­bai and Delhi, land trans­ac­tions have slowed in the last few years and prices have stag­nated or fallen coun­try wide.

“When we are buy­ing land, we are con­stantly ne­go­ti­at­ing down­ward. With slow pick-up in res­i­den­tial de­mand in the last three years, landown­ers who want to sell land are smart enough to drop (prices) by 5-10% par­tic­u­larly in the sub­urbs of Mum­bai,” said Venkatesh Gopalkr­ish­nan, chief ex­ec­u­tive of­fi­cer (CEO), Shapoorji Pal­lonji Real Es­tate.

The Mum­bai-based firm has been scout­ing for land in Mum­bai, Pune and Ben­galuru for af­ford­able hous­ing projects.

In Gu­ru­gram, where home sales have sig­nif­i­cantly dropped, land prices, too, have dropped in the range of 25-50%, he said.

The past year has seen some deals at at­trac­tive val­u­a­tions.

For in­stance, af­ter two failed at­tempts, Glax­osmithK­line Pharmaceuticals Ltd sold 60 acres at Thane to Oberoi Realty Ltd for ₹ 555 crore.

An­a­lysts be­lieve the de­vel­oper struck a plum deal with a 30-40% dis­count though it will have to pay var­i­ous gov­ern­ment charges for con­ver­sion of in­dus­trial land into res­i­den­tial.

Re­cent land deals in the Mum­bai Metropoli­tan Re­gion (MMR) in­clude Lodha Group buy­ing a five-acre plot for ₹ 375 crore at Jo­gesh­wari and Kanakia’s pur­chase of a seven-acre land at Vikhroli for ₹ 360 crore.

Run­wal group is close to buy­ing 2.7 acres from Rashtriya Metal In­dus­tries for ₹ 180 crore.

Land bro­kers say all these deals are be­ing closed at around 20% lower than the ask­ing price or at the same rate 4-5 years ago.

“Apart from a few well-de­vel­oped plots, prices have clearly not moved up across the coun­try. Even (prices in) some of Delhi’s prime res­i­den­tial colonies are down by 40%,” said Ra­jeev Tal­war, CEO, DLF Ltd.

DLF re­cently won a prime 12-acre land through an auc­tion for ₹ 1,496 crore.

Ac­cord­ing to prop­erty ad­vis­ers, DLF paid a premium of 30-40% than the sur­round­ing area. Tal­war says the deal is not re­flec­tive of the mar­ket and it was “op­por­tu­nity-based given the scarcity of good land parcels around the area”.

“Landown­ers have be­come more re­al­is­tic now and have ac­cepted that land as an as­set will not ap­pre­ci­ate much in ur­ban ar­eas in the next three­four years as well,” said Nis­hant Kabra, lo­cal di­rec­tor and head of land ser­vices (West In­dia) at JLL In­dia.

Ac­cord­ing to Ashish Singh, man­ag­ing di­rec­tor (real es­tate in­vest­ments), Stan­dard Char­tered Pri­vate Eq­uity Ad­vi­sory (In­dia) Ltd, while land prices haven’t dropped in ab­so­lute value, in an in­fla­tion-ad­justed terms, prices may have fallen by as much as 50% in the last 6-7 years.

He said the in­volve­ment of PE in­vestors at the land-buy­ing stage un­like be­fore have re­stricted de­vel­op­ers from in­dulging in spec­u­la­tive buy­ing of large land banks.

“This also puts a down­ward pres­sure on land prices. There is a de­mand side push, too, to bring prices at a ra­tio­nal level,” Singh added.

High gov­ern­ment charges and premium have made it tough for de­vel­op­ers to buy new land parcels and ex­e­cute projects in cities like Mum­bai.

“The in­crease in de­vel­op­ment po­ten­tial of cer­tain ar­eas should ef­fec­tively lead to ap­pre­ci­a­tion on the land price, but on a per square ft ba­sis, land prices have not moved up and land deals are hap­pen­ing at a dis­counted rate,” said Vrushank Me­hta, head-cor­po­rate strat­egy and land ac­qui­si­tion, Wad­hwa Group.


An­a­lysts be­lieve the de­vel­oper struck a plum deal with a 30­40% dis­count

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