Developers buy prime plots in distress sales amid realty woes
MUMBAI: Large developers and business groups are finding the continuing stress in the realty market an opportune time to buy up land banks for future expansion, with several prime land parcels up for sale at discounted rates and attractive terms.
As several distressed land owners and real estate firms try to get rid of large land parcels in prime areas to generate cash, a few well-funded builders have been able to crack land deals at attractive prices in the past few months. Many others are scouting for such similar distressed sales.
According to real estate consultants and developers, land prices have fallen in the last two years by up to 50% in certain key real estate markets, particularly in the Delhi-National Capital Region (NCR). In cities such as Mumbai and Pune, the decline has been 10-15%, they said.
“This is a great time for quality players to expand. Land prices have softened and high quality land parcels are available at very good prices. At the same time, we are getting land parcels which are at great locations at attractive terms,” said Mohit Malhotra, managing director and chief executive officer (CEO), Godrej Properties Ltd. Last year, Godrej Properties took over six land parcels spanning across 300 acres of land in Pune from stressed local builder Solitaire Group, acquiring 50% stake in a special purpose vehicle which holds the land. Malhotra said the company has been able to sign the land deal at a discount of around 30%.
Last year, the Godrej group firm signed a record 12 land deals through a combination of outright purchases and partnerships with land owners.
One of its biggest deals last year was buying the marquee RK Studio at Mumbai’s Chembur area. “We have taken prime properties in Bandra. We acquired RK studio. All of them are high-quality land at city-centric locations. We have signed them at attractive terms,” Malhotra said, adding land prices in Mumbai have softened by 10-15% while in Gurugram, it has fallen by 40-50%.
This month, retail firm DMart founder Radhakishan Damani bought an 8.8-acre parcel at Mumbai’s Borivali suburb from debt-laden CCI Projects for over ₹500 crore. According to land brokers who did not want to be identified, the deal was signed at a 10-15% discount.
Godrej’s Malhotra said the company is also actively monitoring stressed assets that are under National Company Law Tribunal (NCLT) proceedings.
“The liquidity crunch in the market, and stringent Rera (Real Estate (Regulation and Development) Act) and IBC (Insolvency and Bankruptcy Code) norms have led to a softening of land prices for partially launched projects. This is a huge opportunity to ramp up development pipelines across the country,” said Vrushank Mehta, chief investment officer, R Retail Venture, a joint venture between real estate firm Runwal Group and Warburg Pincus.