Mumbai: Real estate firm Raheja Universal Ltd is looking to sell land parcels, totaling over 600 acres located outside the Mumbai Metropolitan Region (MMR), to fund its forthcoming projects as it focuses its business in Mumbai and its suburbs.
MMR refers to the region in Maharashtra consisting of Mumbai and its neighbouring towns, including Thane, Navi Mumbai and Vasai-Virar, among others.
The Suresh Raheja-promoted firm, which mainly operates in Mumbai, had earlier planned to step out of the city but so far it has only executed one residential project in Mangalore in Karnataka.
It gradually plans to exit from all the joint ventures and land parcels that it currently owns or co-owns in seven cities in the next few years.
“We are looking at monetizing land parcels outside MMR. We will unlock that before we buy anything more. Our plan is to deleverage outside Mumbai and consolidate here. There are certain land banks outside (MMR) which we do not have the strength to execute. So while we will look at buying more land, we will exit from all ventures outside the city," Ashish Raheja, managing director, Raheja Universal, said in an interview with Mint on 13 July.
As per a Crisil Research rating report released in 2010, the company has a land bank of close to 1,202 acres across eight cities in India. Of this, 577 acres are in MMR and the remaining in Pune, Chennai, Hyderabad, Panchkula, Goa, Mangalore and Nagpur, either owned by the company or held through joint ventures or joint development agreements.
Raheja declined to confirm these figures but said that monetizing land parcels is an ongoing process which the company started to push aggressively since last year.
“At any given time depending upon our current and future requirements we may take strategic decisions that are in the best interest of the company," he said.
In 2010, the company had announced its plan to tap the capital market through an initial public offering (IPO) and raise around ₹ 850 crore. However, the company had shelved the plan following poor market sentiment.
In a draft red herring prospectus filed with capital markets regulator Securities and Exchange Board of India (Sebi) in April 2010, the Mumbai-based developer had said that it would identify and develop projects in locations outside MMR which, it believed, have potential for value appreciation.
“Being compliant is very important for us. We have realised with certain projects that we do not have the bandwidth in other states like we have in Mumbai. Compliance, local relationship, customer requirement, on ground realities - we do not have that bandwidth. We might go ahead if one comes with a fully approved project (outside MMR) but navigating regulatory is something not many developers have done pan India," Raheja said.
Many large developers, including DLF Ltd and Unitech Ltd, have earlier followed the same route of exiting from most of its non-core assets to pare its piling debt.
“Selling off land or monetizing land is a common factor that we see these days across developers which have significant debt on the balance sheet. The other typical reason is when one has finite or limited management bandwidth to execute projects outside one’s core market because it requires a lot of understanding around construction development, sales, marketing, customer interface and so on and so forth. One would tend to focus on your core strengths and where you think you can better manage the project economics," said Shashank Jain, partner, transaction services, PricewaterhouseCoopers (PwC) India.
Raheja Universal has chalked out its expansion plans in Mumbai and its suburbs for the next few years. The company, which operates mainly in the residential segment, is also ramping up its commercial real estate portfolio. It is currently in the process of building around one million sq.ft of commercial space at Navi Mumbai, where it has about 100 acres land area. It is also acquiring an additional 37 acres of land in the region to expand its commercial business.
At present, only about 10% of its revenue comes from the commercial segment. The company plans to take it to 20-30% in the next few years.
On 8 January, Mint reported that Raheja Universal was looking to sublet a 200,000 sq.ft plot at Navi Mumbai to Taiwan-based contract manufacturer Foxconn to start its first manufacturing facility in the country. Raheja, however, declined to comment on the development, citing confidentiality.
On the residential side, Raheja Universal is planning to launch three housing projects in Mumbai and its suburbs by 2017. Five of its housing projects located both in Mumbai and Mangalore are in various stages of construction. The company is currently on the look-out to sign joint development agreements with other developers or land owners for its future expansion plans.