Big builders scouting stuck residential projects

Mumbai: Large real estate developers, such as House of Hiranandani, Tata Housing Development Co. and Godrej Properties Ltd are expanding their portfolios and footprint by acquiring residential projects that are stuck, usually for want of money, or buyers, or both.

House of Hiranandani (HOH), a real estate venture of Surendra Hiranandani, plans to expand its presence in Mumbai and enter markets like the National Capital Region (NCR) and Pune by buying stressed assets from or forging alliances with developers whose projects are stuck.

In a 20 April interview, Hiranandani said that his company is looking to acquire projects worth between Rs.500 crore and Rs.750 crore or with land of around 10 acres in NCR, Mumbai and Pune.

So far, the firm has focused on building residences in Bengaluru and Chennai, though it recently entered Mumbai—a stronghold of the other Hiranandani company Hiranandani Constructions. (Surendra is a co-founder, although his brother Niranjan runs it.)

Tata Housing is at present scouting for projects which are at an initial stage of development or at a planning stage, in Mumbai and Delhi.

Brotin Banerjee, chief executive and managing director of Tata Housing, said that the number of local builders approaching Tata Housing, either for joint development or sale of under-construction projects, has increased significantly in the last two years.

“There is a good amount of opportunity for a brand like us. We are right now talking to different developers and exploring opportunities in the four metro markets. The size of the deal depends on the market. In Mumbai, it has to be close to 5-7 lakh sq.ft; in Bengaluru, it could be larger. In terms of value, it has to be more than Rs.300 crore,” said Banerjee.

The company plans to add about of 8-9 new projects across the four metros this year. It also expects to double the number of homes it will deliver to 10,000 units during the period.

In November, Tata Housing entered into an agreement with Mumbai-based Neptune Group to jointly develop a 10-acre residential project in Bhandup, a Mumbai suburb.

In the last two years, 30-35% of Tata’s product portfolio has come from outright purchase of assets from local builders. The rest has been jointly developed with other firms.

Even lesser-known firms are following this strategy.

Mumbai-based developer Wadhwa Group said it plans to start work on two projects worth about Rs.1,000-1,500 crore, spread across a million sq.ft in Mumbai this year.

The company’s managing director Navin Makhija said he is looking at about five to six projects in Mumbai. A couple of them are in an advanced stage of negotiation, he added. Makhija’s plan is to enter into a joint venture or opt for a joint development model.

Deals such as these work to the benefit of both parties.

In an earlier interview with Mint, Pirojsha Godrej, managing director and chief executive of Godrej Properties, said a developer such as Godrej Properties could help monetize projects faster and “bring greater value to them”.

“We are seeing a lot of opportunities from the fact that we have been able to sell quite well despite the market being sort of subdued. And what that has allowed us to do is to make a case to other developers that we can help them monetize their products,” he had said.

And there are many in need of such help.

According to Samir Jasuja, founder and managing director of real estate database firm PropEquity, the number of stressed assets mainly in the residential segment has grown by at least 50% in the last two years. Most are located in NCR and Mumbai.

Ramesh Nair, chief operating officer, JLL India, a property consultant, said many smaller developers are looking to partner with branded names to relaunch their products, and in “many cases investors are pushing the developer to partner with a better marketable name”.

“This trend is expected to continue until sales pick up. It is also a win-win as big developers get projects that have already been approved and at a lower cost of entry,” Nair said.

Credits Live Mint

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