Godrej Properties to raise ₹2000 crore debt to buy land in next one year

Mumbai: Real estate firm Godrej Properties Ltd, which has been on land buying spree over the last two years, plans to further invest in land parcels seizing opportunity of the falling land prices across major cities amid the slowdown.

The Godrej group firm plans to raise around ₹2000 crore through debt to fund land acquisitions in the next one year. The strategy is in line with its overall target to buy land worth around ₹5000 crore in the next few years, said a top company official.

"We raised about ₹3100 crore of equity earlier this financial year and previous financial year with clear understanding that it would be fully used to acquire new land opportunities. In addition, we are quite comfortable on taking on debt given our attractive borrowing costs," Pirojsha Godrej, executive chairman, Godrej Properties told Mint.

The company doesn't plan to raise fund through equity, he said adding that the additional ₹2000 crore would be raised only through debt.

Godrej said in the last two years the company has signed land deals worth around ₹3000 crore either through outright purchase or in partnership with other developers.

In financial year 2019-2020, Godrej Properties inked seven new land deals across Mumbai, Bengaluru and the National Capital Region (NCR) spanning over 16.78 million sq ft of space. In the previous financial year alone, the company added 30 million sq ft of new projects to its portfolio.

Godrej Properties' latest big acquisition was a ₹1300-crore purchase of 26.58 acre of land from the Railway Land Development Authority at New Delhi's Ashok Vihar. It plans to build a new 3.28 million-sq ft residential project over the land. Last year, the company also bought Mumbai marquee property RK studio over which it is currently developing a luxury housing project.

Last week, Godrej Properties announced purchasing a prime 3 acre land plot at Mumbai's Powai area for around ₹153 crore.

According to him, land prices have fallen by 10-15% in some of the markets with NCR seeing the sharpest fall by around 30% over the last two years.

"In a long cycle business like real estate we don't think it makes sense to be chasing after land when every developer is looking to buy. Land prices can tend to get stretched. In a moment when there are not too many buyers and there is a liquidity issue, we think there is reasonable valuation and favorable terms.available in the market. So we do think that this counter cyclical investments make a lot of sense," Godrej said.

According to the credit rating agency India Ratings and Research (IndRA), share of top ten listed real estate firms have almost doubled to 13% in FY20 from 6% in FY 2017.

"In a market environment where NBFCs are de-growing their books and many traditional developers monetising land assets to reduce debt, Godrej Properties has placed themselves well to ride the consolidation story that will unfold big time in the next few quarters," Nishant Kabra, Senior Director, JLL India, a property consultancy firm.