Home >Companies >Developers opt for plot sales for quick cash flows, easy launches

Bengaluru: Many well-known (or branded) developers have started selling plots, some for the first time, in a bid to generate quicker cash flows and tapping a strong demand for smaller plots of land, even as apartment sales remain tepid.

Plots not only sell faster, but need only basic infrastructure and fewer approvals and are therefore far easier to launch, realty firms said. However, the market has usually been dominated by smaller and local developers with most large ones preferring to sell apartments or houses.

Bengaluru-based Salarpuria Sattva Group launched its first plotted development a couple of of months back, and Embassy Property Developments Pvt. Ltd is preparing to launch Embassy Springs, a large development with 1,000 plots as part of its 300 acre mixed-use development in north Bengaluru.

“We did a pre-launch for the plotted project two months back for our closed circle of employees and friends and sold about 175 plots. They are quicker to sell, and generate better cash flows. It also gives buyers the flexibility to build later according to their individual taste," said Embassy chairman Jitendra Virwani.

Home sales are still weak, as the real estate sector battles a two-year long slowdown, resulting in developers curtailing project launches and simply focusing on executing existing projects to hasten delivery to customers.

In such trying times, realty firms are surprised to discover the demand for individual plot of land has not waned.

Another city developer, Nitesh Estates Ltd, which has a robust portfolio of high-end residential projects, launched a plotted development on Kanakpura Road a couple of months back and is now gearing up to launch a second before Diwali.

The first one generated revenue of about 25 crore, said chairman Nitesh Shetty.

“By selling plots, the core focus of the business remains the same and is just an extension. In a tough market, that churns out cash faster," Shetty said.

Plots are available at a broad price range, from 10 lakh to 1 crore, even higher. Regional developers, who have been selling plots, particularly in national capital region (NCR) and in southern states of Tamil Nadu and Karnataka, usually sell at the lower end of the price band, where the main attraction is to buy a piece of land, without much attention to the infrastructure offered.

Nitesh Estates, which has entered into a joint venture arrangement with the land owners for both the projects, is selling plots at 1-1.20 crore on Kanakpura Road.

“Our plots charge a certain premium because we provide the actual infrastructure including amenities such as tennis courts and a gymnasium. There is a demand for good quality land which comes with adequate infrastructure," said Shetty.

Not too many branded developers were present in this segment until recently.

“It is a large market in Bengaluru, where about 40,000 plots are sold every year but not many by developers in the organized segment," said Vinod Menon, director and chief executive, Citrus Ventures Pvt. Ltd, a real estate development firm that also sells plots.

Citrus sold some 700 plots in the last one year and plans to launch a couple more.

“Land prices appreciate by 30-40% in a year’s time, and the plots cost about one-fourth of an apartment," he said.

Gurgaon-based Unitech Ltd recently started selling plots in its Uniworld City project in south Chennai on Snapdeal.com.

The realty firm has sold plots earlier in the project, but this time it decided to sell some more plots online.

“This ensures we get more eyeballs and also addresses buyers who are outside the country. Overall home sales in Chennai have been quite slow, but we have received unprecedented response for these plots online," said Jaideep Singh, senior vice-president, business development, Unitech.

The sale of plots on Snapdeal was more of a pilot project to check out the online experience, and now Unitech will do a fresh launch of a different set of plots by the end of this month, Singh said.

Cash realization for a developer in plot sales happens in 12-15 months time, compared to say 3-4 years in the case of an apartment sale, which typically involves a construction-linked payment process, said property consultants.

“Apart from laying out the infrastructure, that adds a lot of value in selling plots, developers adopt the joint venture model with land owners where the capital expenditure is not high. While the developer can launch the project faster due to no actual development involved, land owner can sell his share at a premium due to the project branding," said Rajeev Bairathi, executive director, capital transactions group and north India, at property advisory Knight Frank India.

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