ATS to in­vest Strin­gent norms weigh­ing on sec­tor Rs2,000 crore on af­ford­able homes

Sign of dis­tress stronger than ever with un­or­ga­nized realty firms grad­u­ally hand­ing over reins to cred­i­ble ones

HT Estates - - HTESTATES - Mad­hurima Nandy and Bidya Sa­pam ht­es­tates@hin­dus­tan­ Press Trust of In­dia ht­es­tates@ hin­dus­tan­times. com

BEN­GALURU Strin­gent norms in the new reg­u­la­tory regime and an ex­tended lull in the real es­tate sec­tor are likely to make it tougher for many devel­op­ers to keep their heads above wa­ter go­ing for­ward, with no re­vival in sight.

and un­or­ga­nized devel­op­ers and mid-sized firms grad­u­ally hand­ing over the reins to so- called branded, cred­i­ble firms.

Mum­bai’s Go­drej Prop­er­ties Ltd has built a port­fo­lio of projects by col­lab­o­rat­ing with smaller firms, mostly where the lat­ter has been un­able to de­velop t he project t hem­selves. “Smaller devel­op­ers want to part­ner with us for mul­ti­ple projects in one go, but we pre­fer tak­ing up one by one. Ac­tive dis­cus­sions are on with ex­ist­ing de­vel­oper part­ners also for new projects. These devel­op­ers have fun­da­men­tally re­alised that project de­vel­op­ment is not for them,” said Mo­hit Mal­ho­tra, man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer.

“Many landowner-turned-devel­op­ers are now fo­cus­ing on their core busi­ness of land, and spe­cial­ized firms with strong brand and man­age­ment teams will con­tinue de­vel­op­ing projects,” he said.

Trans­ac­tions of dis­tressed as­sets are hap­pen­ing in var­i­ous avatars. There are devel­op­ers who want to get out of the busi­ness and are en­gag­ing in dis­tress as­set sales. Then there are joint de­vel­op­ment, joint ven­tures and de­vel­op­ment man­age­ment mod­els where a larger de­vel­oper steps in and takes over the mar­ket­ing, sales and con­struc­tion of a project from the ex­ist­ing firm, in re­turn for a share in rev­enue or profit or a man­age­ment fee.

Anuj Puri, chair­man of Anarock Prop­erty Con­sul­tants, said the num­ber of devel­op­ers in the mar­ket is shrink­ing, with smaller firms re­sort­ing to dif­fer­ent means of stay­ing afloat.

“RERA (Real Es­tate Reg­u­la­tory Author­ity) com­pli­ance norms, cou­pled with steadily de­clin­ing hous­ing de­mand, has led to the exit of many small and fi­nan­cially weaker play­ers, in­clud­ing builders, landown­ers and bro­kers. Ad­di­tion­ally, the ex­tend­ing debt pres­sure, in­abil­ity to ex­e­cute projects and other fi­nan­cial chal­lenges led to bankruptcy and in­sol­vency of many devel­op­ers,” Puri said.

To be sure, the dis­tress-led con­sol­i­da­tion is go­ing to be a grad­ual process. “The ones with low lever­age, whether small or big, will sur­vive. Higher lever­aged builders will be forced to sell off. But the key take­away is that the tra­di­tional way of do­ing real es­tate is fast dis­ap­pear­ing and the ones who will suc­ceed will build their busi­ness mod­els around the right prod­uct, pric­ing and mar­ket­ing strat­egy. It’s not a land-bank­ing busi­ness any­more,” said a mid-sized Pune de­vel­oper, who didn’t want to be named.

The data is wor­ry­ing. A Jan­uary re­port by Knight Frank In­dia said home sales vol­ume hit a seven-year low in 2017, see­ing a 38% decline from the peak of 2011. Home launches, too, saw a sharp fall of 78% last year to 103,570 hous­ing units from 480,424 in 2010.

Or­bit Corp. Ltd’s prime prop­erty Baug-E-Sara in south Mum­bai’s Ne­pean Sea Road, which it had bought for Rs80 crore, has been ac­quired by Sun­teck Realty Ltd for around Rs34.20 crore, said a Mint re­port in Fe­bru­ary.

Or­bit has faced at­tach­ment of prop­er­ties as lenders laid claim, with Vardhman Devel­op­ers Ltd ap­proach­ing the Bom­bay high court to re­cover around Rs118 crore from the com­pany.

Pu­jit Agar­wal, Or­bit’s man­ag­ing di­rec­tor, said he is fo­cus­ing on try­ing to bring stalled projects back on track.

Even as uncer­tainty looms with the State Bank of In­dia (SBI) fil­ing in­sol­vency pro­ceed­ings in the Na­tional Com­pany Law Tri­bunal (NCLT) last year, Agar­wal is hope­ful he will be able to turn around the com­pany.

“Real es­tate de­vel­op­ment is cycli­cal and one must have the pa­tience and bear the down­turn,” he said.

An­other Mum­bai firm, Nir­mal, faced with debt is­sues, last year set up a sep­a­rate ver­ti­cal Nir­mal Ven­tures to form part­ner­ships with other devel­op­ers to jointly de­velop its land. It has inked deals with Go­drej Prop­er­ties, L& T Realty and, most re­cently, Shapoorji Pal­lonji Real Es­tate. “...We are still eval­u­at­ing other projects for fur­ther tieups. We will do cou­ple of more tie-ups this cal­en­dar year,” said chair­man and man­ag­ing di­rec­tor Dharmesh Jain. It will “fol­low the dual route of de­vel­op­ing projects of its own and in part­ner­ship as well.”

In Mu­lund alone, Nir­mal owns land with de­vel­op­ment po­ten­tial of around 15 mil­lion sq.ft. “Clearly, we needed more en­ergy in terms of part­ners to has­ten the de­vel­op­ment process for Nir­mal,” he said.

Anarock’s Puri said many builders who are in trou­ble or want to exit real es­tate de­vel­op­ment have good land parcels.

“...There is still de­mand for land. Sothe­way­to­come­out­ofthe sit­u­a­tion is to con­sol­i­date with large cor­po­rate firms an­dusethe mon­ey­tode­liv­erear­lier­com­mit­ments. The trou­ble would have been if there was no de­mand for land,” he said.

It hasn’t helped that banks have­con­tin­ued­to­be­wary­oflend­ing to the sec­tor, andthereis alot of cap­i­tal chas­ing a few good devel­op­ers.

Ra­mashryaYa­dav, chief ex­ec­u­tive-real es­tate prac­tice, Edel­weis­sGroup, said they­have­been cau­tious about lend­ing to small devel­op­ers. “Smallerde­vel­op­ers would in­creas­ingly find it dif­fi­cult to sur­vive with­out the back­ing of large sales plat­forms or de­vel­op­ment­part­ners. The­costof sales would­be­un­sus­tain­able­for smaller devel­op­ers driv­ing them out­of­busi­ness. Wewil­lseealarge con­sol­i­da­tion as re­sult of RERA, ush­er­ing­growthof­mor­e­in­sti­tu­tional play­ers. I won’t be sur­prised if 30-40% of devel­op­ers are forced to con­sol­i­date with stronger firms,” he said.

As Khushru Ji­jina, man­ag­ing di­rec­tor, Pi­ra­mal Fi­nance Ltd, one­ofthe­mostag­gres­sive­len­ders to real es­tate, said, “Real es­tate de­vel­op­ment will no longer be a min­i­mum cap­i­tal-high re­turn­low­gov­er­nance­model. The­more es­tab­lished­play­ersinthe­mar­ket will grow from strength to strength, edg­ing out smaller devel­op­ers in the process.” NEW DELHI: Realty firm ATS’s founder Ge­tam­ber Anand on Wed­nes­day launched a new ven­ture HomeKraft to de­velop mid- in­come and af­ford­able hous­ing projects and will in­vest Rs2,000 crore over the next five years to build about 6,500 units.

Af­ford­able hous­ing, which has been ac­corded with in­fra­struc­ture sta­tus in 2017 bud­get, has gained mo­men­tum on the back of i nter­est sub­sidy of­fered by the gov­ern­ment and lower goods and ser­vices tax ( GST) rates.

HomeKraft will de­velop homes of size rang­ing from 950 sq. ft to 1,600 sq. ft and in a price range of Rs30- 70 lakh, Anand told re­porters in New Delhi.

To start with, he said, the com­pany would de­velop projects in the na­tional cap­i­tal re­gion ( NCR) and then across the coun­try.

“In ATS In­fra­struc­ture, we are de­vel­op­ing bou­tique hous­ing and large for­mat apart­ments of over 1,600 sq ft. So I have launched a new ven­ture HomeKraft where flats of size lower than 1,600 sq ft will be of­fered to cus­tomers,” said Anand, who is also the chair­man of re­al­tors’ body Con­fed­er­a­tion of Real Es­tate Devel­op­ers As­so­ci­a­tion of I ndia ( Credai).

He said the com­pany has al­ready en­tered i nto j oint de­vel­op­ment agreements with land own­ers for four projects cov­er­ing 10 mil­lion sq. ft of saleable area. HomeKraft’s CEO Pra­soon Chauhan said the com­pany plans to de­velop about 6,500 units over the next 3- 5 years with ex­pected sales rev­enue of Rs4,000-5,000 crore.

The com­pany would in­vest about Rs2,000 crore on con­struc­tion of these units and the same would be funded through in­ter­nal ac­cru­als, debt and pri­vate eq­uity funds, he said, adding that the first project would be launched by June this year.

On share­hold­ing pat­tern of this new firm, Anand said the com­pany has been founded by him in his per­sonal ca­pac­ity and the team would also have some eq­uity.

“It will be at arm length with the ATS”. The com­pany is in talks with PE play­ers to raise funds at en­tity level, he added.

“We are build­ing on the legacy of ATS, which is syn­ony­mous with qual­ity con­struc­tion and timely de­liv­ery. More­over, in HomeKraft we are also de­sign­ing ev­ery apart­ment with max­i­mum space ef­fi­ciency and in­te­grated util­i­ties which will ful­fil the hous­ing needs of this seg­ment,” Chauhan said. ATS has de­liv­ered nearly 30 mil­lion sq. ft of res­i­den­tial space and 40 mil­lion square feet of area in un­der­con­struc­tion.



Sig­nals of dis­tress across prop­erty mar­kets are stronger than ever with the fall of many firms

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