Realty players return to land acquisitions

Following a slew of new launches in the affordable housing segment in the past few months, real estate developers in the country are once again showing interest in land acquisition.

They are now also expecting “some price escalations” for residential properties, with easier liquidity and overall positive market environment in the second half of the year.

“We believe developers’ appetite for land has increased, given easier financing conditions and availability of prime land parcels (which many developers do not have) at reasonable rates. Increase in both off-takes and unit prices has improved developers’ confidence to purchase new land, in our view,” J P Morgan analyst Saurabh Kumar said in a note to clients.

In recent deals, Indiabulls Real Estate won the four-acre Mantralaya modernisation project in Mumbai with a bid of Rs 1,376 crore.

DLF Ltd, the country’s largest realtor, won a 350-acre plot in Gurgaon for about Rs 1,750 crore after two other bidders — Unitech and Bharti — were disqualified on technical grounds.

DLF, however, still wants the government to ease policies to ramp up deals. “The overall demand is certainly firming up. All the developers have reduced property prices in the past so I don’t think any price hike can be expected in the near future,” DLF’s group executive director Rajeev Talwar told DNA.

However, if demand continues to build up and supply gets restrained, the situation may lead to prices moving northwards. I think the government should ease the policies on giving clearances faster as that creates unnecessary delay in executing the projects,” he said.

Realty analysts and consultants are skeptical about the plan due to developers’ high debt.
“That (price revival) is something skeptical to talk about right now. Most developers have raised money through capital markets by either a qualified institutional placement of shares or they are lining up an initial public offering. Companies which are heavy with debt or those who have reduced debt by raising capital should not look at purchasing land outright. However, if they have a fair debt position they can look at it,” Ambar
Maheshwari, director-investment advisory at DTZ, told DNA.

Omaxe chairman and managing director Rohtas Goel is optimistic of a price hike early next calender. “We have seen projects being launched at rock bottom prices off-late. The same projects are selling at a premium in the re-sale market, so you can expect developers to launch new projects at a higher price, we would also be looking at acquiring some key land plots,” he said.

Nitin Idnani, research analyst with Enam Securities, said, “Developers are still ready to buy land which can be monetised and [as for] those parcels located in tier 2 and tier 3 cities, developers still want to sell them off as it would be difficult to get returns on that land bank.”

New Delhi-based developer Anant Raj Industries is also looking to buy distressed land from developers reeling under high debt and has started acquiring land in Maneswar and Bhagwandas. The company has allocated Rs 450 crore for land, on which it plans to build affordable homes.

“We are negotiating for many land parcels, which we can get at discounted rates in the current market,” Amit Sarin, director, Anant Raj said.