Large builders opt for townships as small firms exit
Smaller and regional developers are slowly opting out of building townships because of funding challenges, scarcity of land and stringent regulatory norms, leaving a few large firms to rule the space. Due to the ongoing slowdown, many mid-sized developers have tried selling off land and incomplete township projects to larger counterparts, as they concentrate on smaller projects.
Gaursons India, based in the National Capital Region (NCR), has always been into developing townships but may not take up new projects of large sizes any more. Managing director Manoj Gaur said he wants to build smaller projects of 10-12 acres that can be completed in 3-4 years. “Large land parcels are not available today. The financial model has changed, and with RERA, projects have become time-bound,” Gaur said.
There was a township boom in 2005-06 but fewer developers want to build them now. At least three developers (who didn’t want to be named)— one from Pune and two from the National Capital Region (NCR), said they have been in talks to sell their proposed township projects in parts as land or as a whole. “The initial cost of kick-starting a township is huge. The builder must provide overall infrastructure and not all townships eventually make money,” said one of them. “Earlier, images of the fully built township were released first,” said Ashutosh Limaye, head (research) at property advisory JLL India. With RERA, developers have to announce the completion date at launch, so they launch only a portion so they have more control on the construction activity.” Most townships today focus on affordable housing. The new crop is also trying to give them a distinct theme making them technology-enabled, and introducing concepts like student and senior housing.
Marking its entry into mid-income housing, Embassy Group recently launched the first of five phases of its 283-acre townshipin Bengaluru. The flats are being marketed as smart homes, integrated with Amazon Echo devices. “The high investment needed for land acquisition, lengthy gestation phase and long-term commitment of funds have created an entry barrier, which only large developers can scale,” said Reeza Sebastian, Embassy senior VP, residential business.
Shapoorji Pallonji Real Estate is in the process of aggregating 1,000 acres between Mumbai and Pune to build a massive township, currently being conceptualised. CEO Venkatesh Gopalkrishnan says these projects need a theme. “It will be built in the next decade, in phases, around a theme,” he said. “Master-planning of townships needs to be well-thought, with right positioning and product mix. Done right, it builds value.”
Mohit Malhotra, MD and CEO, Godrej Properties , says townships are complex to execute and need“financial and execution capabilities and organisation al support” that smaller players struggle with