Builders interested in 100 acre townships again

Residential townships are making a comeback, with developers gearing up to launch 100-300 acre townships after a three-year lull, when everyone stayed away from such large-format projects.

Townships were the rage in the pre-2008 years, and selectively even after, when developers bought land parcels or deployed large land banks to launch such projects.

However, development of these massive projects proved to be a challenge for many due to their capital-intensive nature, long tenure and heavy infrastructure spend.

Realty firms, this time around, are depending heavily on sale of plots for quicker cash flows and offering products at various price points to attract a larger buyer base. While a few have aggregated land over the years at lower prices, some are entering into joint development partnerships to develop these projects.

With a number of Chinese and Japanese companies looking at opportunities of doing very large-sized projects in India, townships are again in focus.

In June, Mumbai-based Godrej Properties Ltd (GPL), known for its asset-light model of real estate development, announced two townships of 100 acres each in Greater Noida and Bengaluru.

GPL will develop a golf-centric township in Sector 27 of Greater Noida, its first project in the National Capital Region micro-market, and has partnered with AR Landcraft Llp in a profit-sharing 40:60 joint venture with the developer and landowner, respectively.

In a statement, GPL said that it is a strategically located land parcel and is one of the last big tracts available in Greater Noida.

The Bengaluru project is a partnership between GPL and Godrej Agrovet and will be developed under the development management model. It has a potential of up to nine million sq.ft of saleable area and will be developed in phases.

“The earlier townships didn’t turn out to be viable because of the long gestation period and the availability of capital. However, projects being launched now are being positioned differently, with varied products and price points to reach out to a larger customer base. For those building townships on their own land, this is a good time to monetise land in cities such as Bengaluru because the commercial office sector is doing so well,” said Somy Thomas, managing director (valuations and advisory) at Cushman and Wakefield India, a property advisory.

The slowdown in India’s real estate sector in the last three years pushed many residential developers to abandon or redesign large projects into smaller projects that could be developed and sold quickly.

From the real estate crisis also emerged the fact that home buyers preferred projects by established developers, with a good track record.

The Bengaluru-based developer Embassy Group recently launched its largest and most ambitious project, a 300-acre township development in Devanahalli. Embassy Springs has 188 acres of plotted development that is open for sale, and will also have 22 acres of villas and row houses, 20 acres for a club and schools and 35 acres of commercial and retail space.

Embassy Group chairman Jitu Virwani aggregated this land over quite a few years and decided to launch the project now, given the emergence of north Bengaluru as a visible growth corridor.

“We see a lot of potential in opening up land for investment in the north Bengaluru corridor, and are certain that land prices will appreciate over time,” said Reeza Sebastian, vice-president (residential marketing and sales) at Embassy Group.

While plotted development or sale of plots is not new to townships, earlier it would comprise only 10-20% of a project’s area.

“Developers gradually realized that plot sales generate quicker cash flows which are critical, particularly at the start of the project to keep it going. There are examples where plots sold well even when built-up projects failed. Land is always seen as a safe investment, and developers have expanded the plotted sales component in the newer townships,” said Ashutosh Limaye, head of research and real estate intelligence service for Jones Lang LaSalle in India.

Jindal Realty Pvt. Ltd, an O.P. Jindal Group firm, has two large townships at Sonepat and Kurukshetra in Haryana. It is planning to introduce the concept of smaller plots to test the market in a 130-acre land parcel adjoining the Kurukshetra township.

“If it shows positive results, we will build a community around it. We are looking at a model where we obtain the licence (for the land), develop it to a certain level and then sell for better response,” said Gaurav Jain, chief executive officer and managing director, Jindal Realty.

Realty firm Housing Development and Infrastructure Ltd (HDIL) has been in talks with a Chinese developer to explore the possibility of doing a large project together. That apart, HDIL has 550 acres of land in Virar, close to Mumbai, where it is in talks to sell floor space index (FSI) to various developers in the first phase, and will also develop a part of it on its own.

“The government’s smart city concept has also been a trigger, because developers believe that if an area is designated as one, then the government will step in and build the infrastructure. I would also think affordable housing will be an important component in the townships because most of them are coming up in peripheral areas of big cities,” said Hari Pande, the vice-president of finance and investor relations at HDIL.

Credits Live Mint

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