Source: Bs/Raghavendra Kamath / Mumbai March 22, 2010, 0:23 IST
High-value land deals are back in the country’s commercial
capital after an 18-month break. The first two-and-a half
months of this year have already seen developers, with
more cash at their disposal from rising home sales,
close half-a-dozen deals worth Rs 4,000 crore.Three large property deals have already been finalised
this year in Mumbai. The largest among these is the bid to
develop a 250-acre plot in Kharghar (Navi Mumbai) for
Rs 1,530 crore. The deal was won by a consortium of Bhushan
Steel and Subhash Chandra’s Essel Group from the City and
Industrial Development Corporation of Maharashtra (Cidco).
This is the biggest land deal in Mumbai for the past 18 months.
Soon after came a Rs 571 crore deal by the
Wadhwa group to buy 18.18 acres in the Ghatkopar
suburbs from Hindustan Composite, and Sheth Developers
bought Golden Tobacco Company’s property in Vile Parle for Rs 591 crore.
Source: Company announcements
More mega-deals are expected. For instance, sources said
Jet Airways, which bought land in the Bandra Kurla Complex,
for Rs 826 crore around two years ago, is close to signing a
deal to sell the land in a joint development project.
Despite facing setbacks in land auctions in 2009, government
agencies like the Railway Land Authority (RLDA),
National Textile Corporation (NTC) and Mumbai Metropolitan
Region Development Authority (MMRDA) are planning to auction
their land this year again.
| NEW GROUND BREAKERS | ||||
| Buyer | Seller | Amount (Rs cr) | Land size (acres) | Area |
| Bhushan- Essel Group | Cidco | 1,530.0 | 250.0 | Navi Mumbai |
| Sheth Developers | Golden Tobacco | 591.0 | N A | Vile Parle |
| Wadhwa group | Hindustan Composites | 571.0 | 18.8 | Ghat- kopar |
| Source: Company announcements | ||||
ast year due to the property slowdown. In the next financial year
starting April, the authority is planning to raise around Rs 4,500 crore
from selling 25 sites covering 172 acres.
“Overall participation from developers has also improved,'' confirmed
P D Sharma, member, planning and infrastructure, RLDA, the nodal
agency for developing surplus land of Indian Railways.
He said RLDA received 20 requests for qualification (RFQ) from
well-known developers for its Sarai Rohilla plot and 14 expressions
of interest (EoI) for the Bandra land. RLDA is having to re-auction
the Sarai Rohilla plot because the previous winner could not pay the bid money.
Though NTC's last attempt to sell its Finlay Mill in Mumbai to the
Lodha group is yet to materialise, it is planning to sell two or three
more defunct Mumbai mills to developers.
Bolstering the upsurge in demand for commercial land is the rise in
home sales. After a 25 to 30 per cent drop from their peak, home
prices have gone up 15 to 20 per cent in the last nine months as
demand returned to the residential market.
“Finished product (home) sales have gone up. As a result,
developers are willing to pay higher prices and buy land now.
They would not have paid such prices a year ago when home
sales were low,'' said Anuj Puri, chairman of global property
consultant Jones Lang LaSalle Meghraj.
“Developers’ liquidity positions are certainly better now than
a year-and-a-half ago. We are seeing a lot of non-banking finance
companies and mutual funds lending money to developers now,''
added Parry Singh, managing director of Red Fort Capital, an
India-focused realty fund.
 |
Most land buyers in Mumbai are planning to build premium
residential apartments to make the most of their expensive investments.
“Today an average product does not sell. Only good products
by good developers sell. A lot of developers are stuck with title
issues, poor sales and so on,'' said Vijay Wadhwa, promoter of
Wadhwa group.
Wadhwa has already pre-sold 0.5 million square feet
out of 1.6 million sq ft of built-up space in the Ghatkopar
residential project and Sheth Developers is planning
premium residential apartments on its newly acquired land.
DLF, the country's largest developer, recently changed its plans
to build an office-cum-retail complex into a high-end residential
complex in Lower Parel because commercial rents have fallen sharply.
DLF bought the 17-acre Mumbai Textile Mill land
from NTC for Rs 702 crore in 2005.Puri says developers’ interest and ability to pay have also
improved because the floor space index (FSI), the amount of
construction permitted on a given plot of land, is increasing in
Mumbai. Though the base FSI is 1.33 in the Mumbai suburbs,
re-development projects on defunct mill lands, slums and so on get a higher FSI.
This time, however, the revival in land deals is marked by
caution. This was evident at the MMRDA's recent land auction
when none of the developers turned up because the agency's
quoted price of Rs 3 lakh a square metre was considered too high.
“Though markets have revived, deals are being closed only
at reasonable levels. There is money to be made but
developers have realised that they need to be cautious,'' said Red Fort's Singh.
Developers such as Wadhwa group who bought expensive
land parcels, say they are focusing on executing their current
projects than buying new land.
Private equity funds are also equally cautious.
“Though we are looking at property deals actively,
we are focusing on those in which risks have been
taken out and proper approvals are in place,'' Red Fort's Singh added.
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