Re­alty in­vestors pre­fer plots to apart­ments

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

MUM­BAI: Ul­tra-rich in­di­vid­ual in­vestors maybe stay­ing away from pur­chas­ing apart­ments, but they are buy­ing small plots of land as a risk-free in­vest­ment and the pos­si­bil­ity of de­cent ap­pre­ci­a­tion. In the last few months, plot­ted de­vel­op­ment projects cost­ing ₹25-80 lakh per plot have seen ro­bust de­mand even as apart­ments strug­gled to find tak­ers. In­vestors are buy­ing plots from es­tab­lished devel­op­ers who have re­cently en­tered this seg­ment, prompted by the swift sales and easy exit from a sales point of view. Go­drej Prop­er­ties Ltd re­cently launched its first plot­ted de­vel­op­ment project, in north Ben­galuru’s De­vana­halli, and­sold close to 600 out of 950 plots across 100 acres of land. The unit sizes range from 1,200 sq. ft to 3,200 sq. ft, at a start­ing price of ₹43 lakh.

Close to the Ben­galuru air­port, Deve­na­halli may still be a fu­tur­is­tic ad­dress and most buy­ers were in­vestors, with some even­tu­ally build­ing their own homes af­ter a few years.

“We are over­whelmed by the sales, sell­ing close to a mil­lion sq. ft is phe­nom­e­nal in this mar­ket. The clean ti­tle of the land, the lo­ca­tion and the Go­drej brand played a key role. We are look­ing at more plot­ted projects in other cities and this will be a strate­gic busi­ness op­por­tu­nity for us,” said man­ag­ing di­rec­tor and­chief ex­ec­u­tive of­fi­cer (CEO) Mo­hit Mal­ho­tra.

Plot­ted de­vel­op­ments can be com­pleted in a year or so and lend them­selves for quicker mon­e­ti­za­tion of land, faster sales pace, bet­ter cash flow gen­er­a­tion, and quicker ex­its from in­vest­ments com­pared to longer pe­ri­ods of con­struct­ing hous­ing projects.

Vinod Menon, CEO of Cit­rus Ven­tures Pvt. Ltd, a Ben­galuru- based de­vel­oper, said it’s no sur­prise that in­vestors like plot­ted projects given most res­i­den­tial projects are de­layed.

“Therisks are less here. It’s an un­com­pli­cated prod­uct and the up­side is pro­tected be­cause land prices have not de­clined un­like res­i­den­tial prices. On an an­nu­al­ized ba­sis, plots make around 15- 20% IRR ( in­ter­nal rate of re­turn). Not all plots are cheap, but still there are tak­ers. We launched a project with 120 plots, at around ₹75 lakh a plot and sales were good,” Menon said. Cit­rus Ven­tures is now launch­ing a project in north Ben­galuru with plots at ₹18-20 lakh. Mal­ho­tra said many­de­vel­op­er­shave land, but not ev­ery­one is able to sell plots in the cur­rent mar­ket con­di­tions where buy­ers and in­vestors rely more on so-called branded devel­op­ers. Go­drej has been ap­proached by­many­de­vel­op­ers and land own­ers to take over land or plot­ted de­vel­op­ments for quick mon­e­ti­za­tion.

Un­like the Na­tional Cap­i­tal Re­gion, where in­vestors would buy apart­ments in bulk, not many in­di­vid­ual in­vestors are do­ing the same for plots. Also, the plot­ted busi­ness is more­prof­itable if devel­op­ers en­ter the vol­ume game with large land parcels as the mar­gins are lower com­pared­tores­i­den­tial projects.

Ben­galuru’s Em­bassy Group launched its first plot­ted project ear­lier this year, as part of its up­com­ing town­ship, and sold 70% of 900 plots. Reeza Se­bas­tian, se­nior vice-pres­i­dent, res­i­den­tial busi­ness, said the tar­get au­di­ence was pri­mar­ily in­vestors, with a 5-10 year in­vest­ment hori­zon, who may even­tu­ally live there or sim­ply en­joy the cap­i­tal ap­pre­ci­a­tion.

“Thede­ci­sion makingis­much faster when it comes to buy­ing plots. There are no hid­den costs and, largely, no main­te­nance needed. In­di­vid­u­als buy some­times as pure in­vest­ment, or as a gift to chil­dren in the fu­ture and plots are sell­ing across price points,” said Ravin­dra Pai, MD, Cen­tury Real Es­tate Hold­ings Pvt. Ltd. Cen­tury has sold plots start­ing at ₹ 27 lakh up to ₹ 80 lakh.

PLOTS LEND THEM­SELVES FOR QUICKER MON­E­TI­ZA­TION OF LAND

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