Bangalore/New Delhi: With the first signs surfacing of a revival in the realty sector, several developers have resumed buying large plots of land for building luxury and budget housing projects as well as to enter new markets.

India’s largest residential developer, Hiranandani Group, Lodha Group, Indiabulls Real Estate Ltd, Provident Housing Ltd and Anant Raj Industries Ltd have purchased tracts of land in cities such as Mumbai, Kochi and Pune at lower valuations following a boost in sales and improved cash flows from the June quarter.

On the block: National Textile Corp.’s Finlay mill in Mumbai. The Mumbai-based Lodha Group has bid for the 10.4-acre plot, offering a price of Rs710 crore, and has planned new supply and more projects. Kunal Patil / Hindustan Times

NTC now plans to put the Kohinoor Mill No.1 property in central Mumbai on the block for Rs1,100 crore. The Lodha Group may bid for this property as well, said a top executive.

“We bid for Finlay because we are planning new supply, more projects," said Abhisheck Lodha, director, Lodha Group. “We may buy more land if the deal is good. We would build high-end homes in one part of it."

In 2005, when land prices were beginning to peak, Lodha had bought Apollo mill, another NTC property in Mumbai, for Rs180 crore.

“The appetite for land transactions has improved. And if that continues, we can say the market has revived," said Hari Pandey, deputy general manager (finance), Housing Development and Infrastructure Ltd, or HDIL.

The economic downturn had pushed developers such as DLF Ltd, Unitech Ltd—India’s top two realty firms—and Sobha Developers Ltd to sell land and non-core assets such as hotels.

This lull in buying land, which began sometime in mid-2008, followed a three-year realty boom that saw a spate of expensive transactions and continuous land assembling by developers.

Realty firms say they are now buying land for specific purposes. Land prices have not climbed down on par with property prices, but have dipped by 10-20% in certain markets such as Mumbai, Pune, Bangalore and Chennai.

Hiranandani Upscale, founded by Surendra Hiranandani, managing director of Hiranandani Group, intends to buy land in smaller cities such as Pune and Kochi to build townships.

“We are in talks with four private equity players—three foreign and one domestic—to raise about Rs800 crore to develop these projects," said Hiranandani.

The company also plans to launch three projects in Bangalore, Chennai and Hyderabad, where it already owns land.

Indiabulls Real Estate, the country’s third largest developer by market value, is set to buy land in the metros and large cities after selling small parcels in the past eight months, primarily non-core assets such as 2-3% of a 150-acre plot in Sonepat, Haryana.

“We want to buy land in the heart of the city and are looking at Mumbai, Delhi and Chennai. We are also interested in buying through the government auction route and are looking for attractive deals," said Gagan Banga, chief executive, Indiabulls Financial Services Ltd, and group spokesman.

Developers are in a relatively better position to buy land after restructuring debt and offloading part of their inventory, said Ashutosh Limaye, associate director (strategic consulting), Jones Lang LaSalle Meghraj, a property advisory.

“We will now see a lot of developers roping in a partner to buy land. Developers will also tie up with private equity funds at the land buying stage, which was not very common earlier," Limaye said.

As it became more difficult to buy land due to a severe cash crunch, many developers resorted to joint venture projects with landowners to cut costs. But many projects didn’t take off because the landowners demanded more money, he added.

Another set of developers is scouting for cheaper land parcels far from city centres for low-cost and mid-segment housing projects.

After launching two low-cost residential projects in distant suburbs in Chennai and Bangalore, Provident Housing, a subsidiary of Bangalore-based Puravankara Projects Ltd, is negotiating with landowners in Kochi and Coimbatore. Typically, Provident’s apartments are priced at Rs15-20 lakh, excluding taxes.

“We have restrictions in cost because we need to build the homes in a lower price bracket," said Jayakar Jerome, managing director of Provident Housing, at the launch of the Bangalore project this week.

For other builders, the worst is clearly behind them. Anant Raj Industries, which has a land bank of 990 acres, has set aside Rs400 crore for buying land in prime locations as prices have fallen, Anant Raj is looking at launching houses near New Delhi in the Rs15-18 lakh range, said Amit Sareen, executive director.