Hit by the ongoing liquidity crisis involving non-banking financial companies (NBFC) and slow market conditions, realty firm Logix Group has decided to scale down its portfolio by bringing on board partners to either construct, sell or raise debt for many existing projects, said a top company executive.
Last week, the Noida-based the builder firm brought in ATS Group, another developer based in the National Capital Region (NCR), as a project management consultant to complete construction and deliver around 4,500 apartments across three delayed projects. Logix has also formed a joint venture with Tribeca Developers, builders of Trump Towers in India, to develop a mixed-used project in Noida at an investment of about ₹250 crore. Around ₹100-150 crore of the total investment will be raised as debt.
Logix is in discussions with developers both from NCR and outside to strike similar strategic partnerships in the coming weeks for land parcels, as well as its ongoing residential projects. With Tribeca, for instance, it plans to enter into a similar partnership for another mixed-use development.
NCR, India’s largest property market, has been deeply impacted by the crisis involving NBFCs, a key source of funding for developers when home sales are slow, Mint reported in February.
“Our strategy today, given the slowdown in funding since October, is to dilute risk, get good developer brands in as partners for our existing projects, as well as land parcels we own, till the time sales and market sentiment improves. Subsequently, we can take a call on what and how much we want to develop ourselves. It’s a win-win situation, because more established brands come with expertise, which also helps in adding value to the project and in sales," said Shakti Nath, chairman and managing director, Logix Group.
Nath said that now it was not easy to raise debt funding for projects, but more established developers have the expertise to execute and, therefore, would also have better access to capital.
Logix Group is probably one among the many developers, not only from NCR but also Mumbai Metropolitan Region (MMR), which are opening up to the reality of the real estate market today. Property analysts and investors said the NBFC crisis has only accelerated the process of consolidation in the sector, which has already witnessed over five years of slowdown.
Earlier this month, Mumbai’s Omkar Realtors and Developers Ltd brought in Godrej Properties Ltd through a JV to develop a 4.25 acre, prime sea-facing property in the city’s prime Bandra West area. Mumbai-based Omkar has struggled a fair bit to sell luxury apartments on its own in the last couple of years.
“Though sales were slow, the cash flow required for working capital has dried up with NBFCs reluctant to lend. Developers don’t have many options today other than handing over projects to better developers or otherwise buyers will anyway take them to NCLT (National Company Law Tribunal)," said Rajeev Bairathi, managing director, Shearwater Ventures, a capital management and advisory form.