Bangalore: Mounting debt and inability to generate cash flows are forcing mid-sized and small developers in Bangalore to shrink portfolios by divesting real estate assets.
Citrus Ventures, a realty firm that buys “special situation” and redevelopment assets, has taken over two incomplete projects of IDEB Projects Pvt. Ltd.
Citrus, a real estate start-up formed this year, acquired IDEB’s semi-finished Springville project in south Bangalore, with 65 villas planned on a 3.5 acre plot. The project was stuck since 2009 and buyers refused to pay further instalments.
Citrus Ventures has entered the project in the capacity of investor and developer. It has already cleared the project liabilities and is currently marketing the 15% of the units that are to be sold. The project is expected to be complete in the next 12 months.
“The entry costs are much lower in such projects and so are the risks. Much of the hard work such as land acquisition, getting approvals is already done when we enter, and so what is required is cleaning up the project and packaging it,” said Vinod Menon, director and chief executive, Citrus Ventures.
Bangalore-based IDEB, which has a large infrastructure project portfolio and was also a contractor in the Delhi Metro rail project, has a substantial real estate development portfolio in Bangalore, Pune and Uttarakhand.
H.S. Bedi, managing director, IDEB Projects said the company is bringing in co-developers to execute and complete projects wherever possible. In Uttarakhand, it has got a co-developer for a 168-acre industrial park and its 23-acre project in Pune has been acquired by another developer.
“Real estate sector is going through a difficult phase and we will take a call on our future projects after six months. Right now, we are in a consolidatory mode,” said Bedi.
Citrus Ventures has also entered as development manager for IDEB’s 1.3 million sq. ft mixed development (office cum retail space) project in Bangalore. The project has several individual investors as stakeholders. Construction started in 2008 but is yet to be finished.
Citrus is now negotiating with some large international retail brands to take up space in the shopping mall portion. It is also trying to arrange the financing for the project and plans to restart construction in early 2012.
In another instance, Bangalore-based builder Salarpuria Sattva Group is doing the due diligence to acquire a large project in the city’s Sarjapur Road locality from the developer.
“We will rebrand it as a Salarpuria project and build villas,” said Bijay Agarwal, chairman and managing director, Salarpuria Sattva Group, “Instead of buying out the project, we will bring the builder on board and keep his equity as his share in the project.”
Analysts said cash crunch is forcing developers to offload assets.
“Today, sales velocity is low, pre-sales of new projects aren’t happening and there is a lack of capital availability,” said Amit Goenka, national director, capital transactions, Knight Frank India, a property advisory.
“Developers are not holding on and want to sell their assets and liquidity constraints are driving most decisions and turning them into sellers,” he added.