Realty com­pa­nies sharpen In­di­a­b­ulls to sell 50% stake in Mum­bai of­fice fo­cus on timely de­liv­ery as­sets to Black­stone

KEEP­ING TIME De­liv­er­ing homes on time is no longer a mat­ter of choice for devel­op­ers amid ris­ing aware­ness among home­buy­ers and strin­gent reg­u­la­tory norms post RERA

HT Estates - - FRONT PAGE - Mad­hurima Nandy mad­hurima.n@livemint.com Mad­hurima Nandy mad­hurima.n@livemint.com

BEN­GALURU: Ris­ing aware­nesslevels amonghome­buy­ers, strin­gent reg­u­la­tory norms and a pro-cus­tomer ju­di­ciary have com­pelled real es­tate firms to fo­cus on timely de­liv­ery of projects and be­ing ac­count­able to prom­ises made. At a time when many devel­op­ers are fight­ing dis­grun­tled cus­tomers in courts of law, de­liv­er­ing homes on time is no longer a mat­ter of choice. To de­liver wha­tone­haspromisedis theessence­ofthe­newRealEs­tate Reg­u­la­tio­nandDevel­op­men­tAct (RERA). What this is likely to do is, put the cus­tomer at the cen­tre of the busi­ness and im­prove ac­count­abil­ity, and also change the­waythe­sec­tor­op­er­ates—typ­i­cally, home sales have al­ways been more im­por­tant than stay­ing true to what’s promised. The ca­pac­ityand­in­tent­to­be­hon­estto buy­ers are the qual­i­ties that will set good devel­op­ers apart from the rest of the pack, say devel­op­ers and an­a­lysts. “Meet­ing project de­liv­ery tar­gets is a mat­ter of sur­vival for devel­op­ers to­day. There are penal­ties to­day and the reg­u­la­tor has the power to take over the project,” said Anuj Puri, chair­man, Anarock Prop­erty Con­sul­tants. Over the past year or so, many large real es­tate devel­op­ers in In­dia’s largest prop­er­ty­mar­ket, theNa­tional Cap­i­tal Re­gion (NCR) cen­tred around Delhi, are em­broiled in in­sol­vency pro­ceed­ings ini­ti­ated against them fol­low­ing a fouryear slow­down­inthe­sec­tor, and court cases ini­ti­ated by buy­ers over non-de­liv­ery of homes. Jaiprakash As­so­ciates Ltd’s (JAL) Wish Town town­ship project in Noida, which was launched in 2007, has 24,000 homes yet to be de­liv­ered to its buy­ers out of a to­tal of 32,000 units. The­com­pany is cur­rently fac­ing in­sol­vency pro­ceed­ings and a res­o­lu­tion process is on. Noida- based Am­ra­pali Group in Fe­bru­ary sought the Supre­meCourt’sper­mis­sion­to­bring­inco-devel­op­ers to help build and de­liver around 41,000 flats to buy­ers. “In the boomyears, de­vel­op­er­spromised they could de­liver a project in three years, apromise­which­can never be met be­cause it takes 5-6 years. Courts have stepped in, launch­ing projects has be­come in­creas­ingly dif­fi­cult with the RERA regime push­ing firms to fo­cus on build­ing and sell­ing homes to ex­ist­ing cus­tomers,” said Ra­jeev Tal­war, chief ex­ec­u­tive of real es­tate firm DLF Ltd. The­re­alestate­sec­tor­wit­nesseda boom dur­ing 2005-08. The global eco­nomic slow­down did put the brakeson­the­sec­tor, but­busi­ness was back to nor­mal by 2009, and un­til 2012, it wit­nessed ro­bust ex­pan­sion. In all of this, the key stake­holder in the busi­ness—the home­buyer— was never ac­cord­ed­pride­of­place, lead­ingto a fun­da­men­tal loss of faith in devel­op­ers. “Thereis alot of neg­a­tivesen­ti­men­ta­monghome­buy­ers to­day­over­not­get­ting­pos­ses­sion of homes on time. The real es­tate mar­ket is down with no priceap­pre­ci­a­tio­nand­slowsales. We have had de­lays in our projects which is why we de­cided let’s com­plete and de­liver projects that were­launched4-5years back,” said R.K. Arora, chair­man, Su­pertechLtd. “De­liv­ery is also im­por­tant be­cause the fi­nal pay­ment of the buyer comes on pos­ses­sion of homes and gen­er­ates liq­uid­ity and we ex­pect to gen­er­ate Rs1,000 crore through it,” Arora said. In the new RERA regime, de­liv­ery is amea­sur­able tar­get with no am­bi­gu­ity and there­fore non-com­pli­ance leads to clear-cut penal­ties where the de­vel­oper is li­able to mul­ti­ple con­se­quences, said RamWalase, man­ag­ing di­rec­tor and CEO, VBHC Value Homes Pvt. Ltd. “We­have­been­fo­cusing­o­nac­cel­er­at­ing our­pro­ject de­liv­ery. One needs to keep up the ex­e­cu­tion pace on the ground, have the fi­nan­cial back-up to com­plete projects with­out re­ly­ing on cus­tomer pay­ments and have all ap­provals in place,” Walase­said. De­liv­ery is­sues have ailed the sec­tor due­towhich­home­buy­ers have now­moved­to­wards readyto-buy­homes(rathertha­nun­der­con­struc­tion ones). While sales have been tepid, the re­turn of buy­ers’ con­fi­dence is crit­i­cal, say devel­op­ers. “...In the last three years, we have put in even more re­sources­to­ward­sex­e­cu­tio­n­and de­liv­ery. Our de­liv­ery record es­tab­lishes the cred­i­bil­ity we have as a de­vel­oper. We un­der­stand that once con­sumers get a home­o­rof­fice de­liv­ered fro­mus, they will buy more,” Ab­hishek Lodha, man­ag­ing di­rec­tor of Lod­haGroup­said. Ex­e­cutin­gand de­liv­er­ing projects on time is ex­pen­sive. Lodha Group, for in­stance, has­spen­tRs4,200 crore on­con­struc­tion pay­out­sa­lonein 2017-18. BEN­GALURU: Global pri­vate eq­uity fir­mBlack­stoneGroupLpis­setto buya50% stakeinIn­di­a­b­ull­sReal Es­tate Ltd’s prime­of­fice as­sets in cen­tralMum­baifora­nen­ter­prise val­u­a­tion of around $1.3 bil­lion, said twopeo­ple di­rectly awareof the trans­ac­tion.

The as­sets in­clude In­di­a­b­ulls Fi­nance Cen­tre and One In­di­a­b­ulls Cen­tre. OnWed­nes­day, In­di­a­b­ulls Real Es­tate in­formed the BSEthat­ne­go­ti­a­tion­sand­dis­cus­sions with the third party in­vestor/s for fi­nal­iza­tion of trans­ac­tion are on and a meet­ing of the share­hold­er­swill­be­con­vene­don 23 Marchre­gard­ingth­e­p­ro­posed di­vest­ment.

In­di­a­b­ulls is also in dis­cus­sion­stomon­e­tise­orsellof­fit­sres­i­den­tial and­com­mer­cial­pro­jects in Chennai. The two Mum­bai as­sets havearound3.3mil­lionsq. ft of leasable area. Along with One In­di­a­b­ulls Park in Chennai, these three com­pleted as­sets are ex­pect­ed­to­gen­er­atean­nu­ityrev­enueof Rs813 crore by2020-21, as per the com­pany’s De­cem­ber quar­ter in­vestor pre­sen­ta­tion.

If the Black­stone-In­di­a­b­ulls deal goes through, it will be the first big real es­tate trans­ac­tion of 2018. ABlack­stone­spokesper­son de­clined to com­ment. In­di­a­b­ulls didn’t re­spond­toane­mail­query. The Mum­bai-based de­vel­oper has one res­i­den­tial town­ship project—In­di­a­b­ulls Greens—in Chennai.

The­p­ro­ject is be­ing de­vel­oped in three phases, of whichthe­first phase has been de­liv­ered. “In­di­a­b­ulls is look­ingto sell off its res­i­den­tial project in Chennai for around Rs250-300 crore. Some buy­ers and in­vestors have ex­pressed in­ter­est. Chennai is a non-core prop­erty mar­ket and hence In­di­a­b­ulls plans to exit,” said one of the two peo­ple men­tioned above, ask­ing not to be named. In an­other trans­ac­tion, In­di­a­b­ulls is also plan­ning to mon­e­tisetheOneIn­di­a­b­ull­sPark project in Chennai’s Am­bat­tur area, which has 2 mil­lion sq. ft of leasable area.

“It is yet to be­de­cid­ed­whether it will be com­pletely sold or will only be a stake sale,” said a sec­ond per­son, who spoke on con­di­tion of anonymity. Un­liketheres­i­den­tial sec­tor that haswit­nessed a pro­longed slow­down, the com­mer­cial real es­tate seg­ment has at­tracted the in­ter­est of in­vestors across the globe.

Black­stone’s real es­tate arm has com­mit­ted around $4.1 bil­lion across 27 in­vest­ments in In­dia, makin­git­pos­si­blythe­largest owner of com­mer­cial of­fice as­sets in the coun­try.

While of­fice has been Black­stone’s core­fo­cusarea­here, it has also been steadily in­vest­ing in shop­ping malls as well as hos­pi­tal­ity projects. Ear­lier this week, Min­tre­ported that Black­stone is set to buy an 80% stake in Nitesh Hub, a shop­ping mall in Pune’s Kore­gaon Park from real es­tate firm Nitesh Es­tates Ltd for around Rs310 crore.

Black­stone and Sin­ga­pore’s sov­er­eign wealth fund GIC Pte Ltd have been ag­gres­sively in­vest­ing in com­mer­cial real es­tate. In 2017, in one of the largest real es­tate deals in the coun­try, GIC bought a stake in DLF Ltd’s rental arm­forRs8,900crore

MINT/FILE

Lodha Group, for in­stance, has spent Rs4,200 crore on con­struc­tion pay­outs alone in 2017­18

MINT/FILE

Chennai is a non­core prop­erty mar­ket

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