BackValuations low, but more sellers than buyers slow down land deals
The Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) are the worst markets for sellers, followed by Pune and Bengaluru
Premium
Bengaluru/Mumbai: Fewer land transactions are taking place in India because of a large undeveloped inventory and stressed finances of property developers, resulting in more sellers than buyers.
The Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) are the worst markets for sellers, followed by Pune and Bengaluru.
Only a handful of developers with deep pockets, and backed by private equity investors, are scouting for land from developers in trouble, mainly to build IT parks or expand residential portfolios.
On the block are mid-sized and some large land parcels that over-leveraged developers are looking to sell. There are also private companies and high-net-worth individuals looking to sell land.
In a market like this, 95% are sellers and 5% buyers, said Mayank Saksena, managing director (land services), JLL India. “Even if it means selling their land at a loss, developers are doing it primarily to get rid of the debt."
Land sales are critical for most developers to cut debt.
Firms like Unitech Ltd, BPTP Ltd, Kumar Urban Development Ltd and M3M India Pvt. Ltd are only a few who have been in talks with other developers to sell their land.
Raheja Universal is looking to sell land parcels outside MMR to fund upcoming projects in Mumbai and its suburbs, Mint reported on 18 July. Peninsula Land Ltd is also in talks with a developer to monetize its Pune land, said two people familiar with the talks.
Land prices have dropped, in some cases by 20-30%.
Piramal Realty and Godrej Properties Ltd (GPL) among residential builders, and office developers like Tata Realty & Infrastructure Ltd, RMZ Corp. and K Raheja Corp. are looking to buy opportunistically.
In September, GPL acquired a 12-acre land parcel in Bengaluru, a rare transaction where the developer made an outright purchase.
“Our strategy is to utilize the current weak real estate environment as an opportunity to build our portfolio," said Pirojsha Godrej, managing director of Godrej Properties Ltd.
The firm is in talks to buy out or strike partnerships for more land in the NCR and Pune, said a person familiar with the development.
Recently, Bengaluru-based Salarpuria Sattva Group partnered with Apollo Global Management Llc to buy out two land parcels in Bengaluru and Vadodara from a consortium of offshore investors for Rs275 crore.
“Sellers are willing to negotiate and give 10-15% discount, if you pay upfront. We bought a lot of land in the last year and are in discussion to buy more," said Salarpuria managing director Bijay Agarwal.
Property analysts said there are fewer realty firms who are seeking an outright purchase compared to the opportunities in a slow market.
“A few developers have started to come back in the market (for land acquisitions) but most of them are looking for one or two things. They are looking for joint developments and joint ventures where they wouldn’t put in money and the risk is minimal. Another thing they have started to look at, even for outright purchase, is smaller plots of high value in prime markets like south or central Mumbai," said Fali Poncha, director, residential and land (Mumbai), Knight Frank India.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
