Bangalore: India’s third largest realtor by market value, Housing Development and Infrastructure Ltd (HDIL), plans to focus on projects that would generate a regular flow of working capital and avoid new businesses such as developing special economic zones (SEZs).
The company is tweaking its business model at a time when the real estate industry is battling a downturn, with buyers staying on the sidelines as property valuations decline in the face of slowing economic growth.
Over the past one month, HDIL has launched three residential projects in suburban Mumbai targeting budget and premium housing buyers at discounted prices.
The response, the company said, had surpassed its expectations. It has sold at least 1,000 apartments out of 1,600 units it offered. The sales have set HDIL, which launched its last residential project in 2007, thinking of a fresh strategy for the year ahead.
“The sales from these projects will generate around Rs1,200 crore which will take care of our working capital needs for the next 18-24 months. The company’s business model will concentrate more on the residential sector because there is demand if you launch at the right price,” said Hariprakash Pandey, deputy general manager (finance), HDIL.
Pandey repeated what many developers have said in the past months—realtors need working capital in times when they are hard-pressed for liquidity. Over the next two quarters, HDIL plans two more launches in Mumbai. Its in-house team is working on the right product mix—pricing and positioning.
The company is known more for its slum redevelopment projects, sale of development rights and of plotted land.
In one of the country’s largest land deals till date, HDIL, which had development rights to one million square feet in Mumbai’s Bandra-Kurla Complex, sold part of it to Adani Group for Rs2,250 crore in 2006. Housing made up a minuscule component of its business. But, the focus will be on residential space now.
Looking ahead, new businesses would take the backseat. Two large SEZs, spread over 5,450 acres in the Vasai-Virar region of Mumbai, multi-services and multi-product zones, have been stalled. “The land is fully paid for but the projects are on hold for now,” said Pandey.
In March, HDIL announced its withdrawal from the oil and gas segment that was being pursued by a subsidiary. The subsidiary failed to win either of the two blocks that it had bid for in the seventh round of the New Exploration and Licensing Policy.
The company, which had earlier announced plans of aggressively pursuing its retail business, will now go slow on it.
HDIL’s stock fell Rs21.7, or 14.85%, to Rs124.45 on the Bombay Stock Exchange on Thursday.