Bharti Realty’s Growth Formula to be Light on Assets, Heavy on Execution
Co to charge up to 12% revenue as fees for projects executed by it
Mumbai: Bharti Realty, the real estate development arm of telecom to retail major Bharti Enterprises, is planning to focus on asset-light model of Real Estate Asset Management (REAM) for its future growth instead of buying land parcels on outright basis, said a top company official.
The company’s fully-owned subsidiary Bharti Land will be executing these projects under the Real Estate Asset Management (REAM) model. Under this model, the company will be lending its brand equity and pay for the development management of the project. The landlord will be responsible for land, approvals, construction cost, marketing and brokerage.
“After a long period, realty sector is coming back to realistic levels and for the prices to come to realistic level, land plays a crucial role. For the past few years, land prices have shot up significantly pushing realty prices beyond the reach of homebuyers. An asset-light model will allow us to focus on controlling the final product price thereby attracting and converting more demand,” SK Sayal, MD & CEO, Bharti Realty, told ET. The Sunil Mittal-backed company will charge around 10-12% of revenue as its fees for projects executed under the REAM model and sold on outright basis.
For any project, to be leased, after being developed under this model, the company will receive minimum fees worth one year lease rentals to be earned from that project.
Bharti Realty recently emerged as the highest bidder to develop an area of nearly 2 lakh sq ft of retail spa- ce near the Delhi International Airport. This project is also expected to be executed by the company through the REAM model.
Apart from this, the company will execute projects under joint development agreements and will focus on government or public-private partnerships projects.
“Cash is required in land transactions. To mitigate that (risk), we will only look at govt auctions. In residential segment, we will not get into greenfield projects. We will instead jointly collaborate with land owners,” Sayal explained.
For projects to be executed under joint development agreements, Bharti will take care of execution, marketing and sales efforts, while the owner will be responsible for land, approvals & construction costs. The company will be focusing on the DelhiNCR, Punjab, and Haryana property markets for both, REAM as well as joint development projects.
ET ARCHIVES Co to focus on asset management and joint developments