To tide over churn, realty firms eye part­ner­ship deals

HT Estates - - FRONT PAGE - Mad­hurima Nandy mad­[email protected]

BENGALURU: Dif­fi­cult times call for des­per­ate mea­sures and the real es­tate sec­tor is noex­cep­tion. The on­go­ing cri­sis, cou­pled with strin­gent mea­sures in the new reg­u­la­tory regime, have made prop­erty de­vel­op­ment chal­leng­ing.

But in the mid­dle of dif­fi­culty lies an op­por­tu­nity.

The emer­gence of var­i­ous busi­ness mod­els have cre­ated op­por­tu­ni­ties for devel­op­ers do­ing well, and so­lu­tions for those in dis­tress.

Mov­ing on from the stan­dard land-buy­ing-for-project-de­vel­op­ment route, or area-shar­ing ar­range­ment­be­tween­landown­ers and devel­op­ers, realty firms are tak­ing strate­gic calls on how to mon­e­tize land assets, in the least cap­i­tal intensive way.

Given the liq­uid­ity crunch, at the core of th­ese new de­vel­op­ment mod­els, is an as­set-light strat­egy.

There­are­many­vari­ants: Master de­vel­op­ment, joint de­vel­op­men­ta­gree­ments(JDA), de­vel­op­ment­man­age­ment(DM) an­drev­enue-shar­ing mod­els, among oth­ers.

As­man­y­firm­sarein­ca­pableof de­vel­op­ing­pro­jects on­theirown, they are pur­su­ing more es­tab­lished devel­op­ers with de­cent cash­flows, and col­lab­o­rat­ing with them on a spe­cific model to mon­e­tise a land par­cel.

Go­drej Prop­er­ties Ltd, which has a large project port­fo­lio, has adopted a flex­i­ble strat­egy to re­spond to su­chop­por­tu­ni­ties in the mar­ket.

Manag­ing di­rec­tor and CEO Mo­hit Mal­ho­tra says the company’s first pref­er­ence is to do a JDAbase­donprofit-shar­ing­with the landowner or de­vel­oper. It also se­lec­tively does DMs, where the­land­holderiswell-cap­i­talised and wants an es­tab­lished de­vel­oper to con­struct, sell and lend it brand eq­uity.

“We­con­sid­ertherequire­ment of the land owner and the land, and then con­fig­ure the de­vel­op­ment model as per the need. RERA has been a trig­ger and there are more devel­op­ers to­day who ap­proach us for part­ner­ships, but we­have­to­be­care­ful.”

Col­lab­o­ra­tion amongde­vel­op­ers is the only way to sur­vive in the cur­rent sce­nario, as the sec­tor inchesto­ward­scon­sol­i­da­tion, push­in­gre­al­ty­firm­sindis­tressto sell land or projects they can’t de­velop to oth­ers.

Srini­vasan Gopalan, CEO, Bengaluru-based Ozone Group, says th­ese mod­elshavestemmed from a clas­si­fi­ca­tion be­tween de­vel­op­er­swho­cansel­landraise money, andthose­whoown­land, but can’t sell un­der their brand.

Ozone­has­signed­mul­ti­pleDM deals with devel­op­ers to de­velop the land un­der its own brand. “I am open to both JDAs and DMs an­dany­route­whichisn’t cap­i­tal intensive. Ozone’s strength is in con­struc­tion and sales, and we ear­nafeeevenifthereis­no­ma­jor up­side. We are not buy­ing land for projects right now.”

Ram Ya­dav, CEO, Edel­weiss Real Es­tate Ad­vi­sory Prac­tice, says the sec­tor has­moved­froma land­bank­ing­mod­el­toa‘cas­hand carry’ model.

Till 2008, ev­ery de­vel­oper was buy­ing land to cre­ate a bank and apo­ten­tial de­vel­op­ment­pipeline. Mum­bai-basedLod­haGroup­was per­haps an ex­cep­tion be­cause even­when­it­bought­landat­apremium, it would­laun­chitim­me­di­ately, he­said. “Thede­vel­op­ment busi­ness is chang­in­grapidly and devel­op­ers want to di­lute the eq­uity locked in land.”

In the last few years, land ac­qui­si­tion has­s­lowed­fol­low­ing lowres­i­den­tial de­man­dand­high lever­age among devel­op­ers.

As a re­sult, sev­eral realty firms havesignedJDAs­tomon­e­tize their land, or to take over the de­vel­op­ment rights them­selves.

The Na­tional Cap­i­tal Re­gion (NCR), where devel­op­ers own large land parcels, is open­ing up to realty firms whicharelook­ing to en­ter the mar­ket­through­part­ner­ships. M3MIn­di­aPvt. Lt­dand Lo­tusGreen­sDevel­op­er­sPvt. Ltd have adopted the master de­vel­oper ap­proach for spe­cific land parcels in the re­gion.

M3M­planstopart­ner­mul­ti­ple devel­op­ers to sep­a­rately de­velop a 185-acre pre­mium land as­set it had ac­quired for ₹1,211 crore from the Sa­hara Group three years ago.

As a master de­vel­oper, it will sign JDAs and earn rev­enue in the process.

“Not just con­struc­tion and fi­nanc­ing, deal­ing with cus­tomers to­day is key to push sales. Project de­vel­op­ment is a3-5 year process and it is clear that some devel­op­ers can do it and many can’t,” saidHar­ishSharma, CEO, Cen­trum Real Es­tate Man­age­ment and Ad­vi­sory.



The NCR is open­ing up to realty firms which are look­ing to en­ter the mar­ket through part­ner­ship­sMINT/

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