Mumbai: Real estate firm Mahindra Lifespace Developers Ltd, a subsidiary of auto maker Mahindra and Mahindra Ltd, is the latest to join the so-called budget housing bandwagon as more buyers shun pricier projects for affordable homes.
The firm, known more for its of high-end projects, particularly in Mumbai, is building 1,500 apartments in a special economic zone (SEZ) in Nagpur, with price tags of less than Rs3,000 per sq. ft, said Pawan Malhotra, chief executive of Mahindra Lifespace.
The SEZ is part of an international airport that would function as a cargo hub, and includes a 25-acre residential project. SEZs are economic enclaves that enjoy tax holidays and other financial incentives.
Property prices in and around Nagpur, Maharashtra’s third largest city by population, are typically in the range of Rs1,600-2,600 per sq. ft, a consultant at property advisory Jones Lang La Salle Meghraj said, requesting anonymity.
“The idea to provide housing that would give the target buyers good value for money. The SEZ and the airport will demand at least 1.5 million sq. ft of development once all the industries come up,” Malhotra said.
The Nagpur residential project, a venture of Mahindra Lifespace and BE Billimoria and Co., will see an investment of Rs500 crore in the next four years.
Mahindra Lifespace also plans mid-segment apartments starting at Rs3,000 per sq. ft alongside more expensive villas in its Chennai SEZ.
In the past eight months, as the Indian realty market began slowing following a global slump, developers such as Puravankara Projects Ltd, Omaxe Ltd and Ansal Properties and Infrastructure Ltd have leant towards more affordable housing projects. Others such as DLF Ltd and Sobha Developers Ltd have cut prices by 15-30% in some of their projects.
But at a time when developers are struggling to generate liquidity, Malhotra says Mahindra Lifespace has Rs260 crore in hand. Its standalone revenue for the year ended December rose 28% to Rs55.7 crore.
Formed in 2001, Mahindra Lifespace, earlier known as Mahindra Gesco, has nearly 4 million sq. ft of development in various cities.
The company stopped buying land nearly two years ago and is now pursuing joint development projects. A 10 February report by brokerage Motilal Oswal Securities Ltd says the firm has no major borrowings against land it has bought.
Macquarie Research, an arm of Australia’s Macquarie Bank Ltd, says in a February report that Mahindra Lifespace has low debt levels, primarily due to its conservative management style, and relatively slow pace of acquiring land and launching few projects in the past three years.
The company’s gearing, or debt as a percentage of equity capital, is only 0.2%, says the report. In comparison, rival Unitech Ltd’s gearing is at 34%, it says.
“The company has been conservative and restrained during times when liquidity was available with multiple debt options and other developers availed of them,” said Unmesh Sharma, an analyst with Macquarie Research.
Mahindra Lifespace shares have fallen 75% from Rs665.10—its 52-week high reached last May—to Rs161.95 at close on Monday. The markets were closed on Tuesday.