After a lull, land deals make a comeback
The Hindu Business Line, August 31, 2009, Page 15
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Coinciding with the return of buyer interest in select pockets of the residential market and the improved liquidity position of builders, land auctions are inching back into the spotlight.
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Moumita Bakshi Chatterjee
The slowdown in the property market, induced by the global meltdown and negative sentiments, had dealt a body blow to the mega land deals, in the country. But the gloom seems to be finally lifting. Coinciding with the return of buyer interest in select pockets of residential market and the improved liquidity position of builders, land auctions are inching back into the spotlight.
Consider this. DLF Ltd recently made headlines when it walked away with 350.7 acres in Gurgaon, for an estimated Rs 1,750 crore, marking one of the largest land deals in the country. The prime land, on the Gurgaon-Faridabad road, had been put on the block for re-bid after the only bidder in the first round (DLF) had drawn attention to certain difficulties in project implementation.
HSIIDC (Haryana State Industrial & Infrastructure Development Corporation) re-invited bids in July this year with easier terms and conditions, including staggered payment plan spread over seven years. This time, DLF clinched the deal with its winning bid of Rs 12,000 per square metre — two other bidders did not qualify on technical grounds.
The land in the Delhi suburb would be used for development of commercial, residential, sports complexes, and an 18-hole golf course. DLF, however, remains tight-lipped about the project, but sources say that the land deal is “positive” for the company, given its proximity to South Delhi on one side and the existing golf course on the other.
DLF is not the only one going after such transactions. Earlier this year, Anant Raj Industries decided to set aside nearly Rs 400 crore from its cash reserves, to acquire land for upcoming residential projects.
So are the land deals back in reckoning, after a long dry spell? Industry experts believe that land acquisition will gather pace, but will remain largely need-based.
“The market definitely is improving, new projects are being launched and the cash flow, for builders, is getting back in shape on the back of QIP issues and some proposed public offers that are being lined-up,” says Mr Manish Aggarwal, Executive Director, Investment Services, Cushman & Wakefield (C&W) India.
Time to buy
While the conditions are turning positive, the biggest clincher clearly is land valuation. In many cases the land prices have corrected nearly 60-70 per cent, says an industry observer.
Agrees Mr Amit Sarin, Director and CEO, Anant Raj Industries. “It is the best time to buy land — the valuation is a fraction of the 2007-level. Everyone is announcing low cost and affordable housing projects and the main ingredient of low cost in real estate is the land cost, not construction cost,” Mr Sarin points out.
But Anant Raj Industries, itself a zero-debt company, expects land buying to remain selective for a while.
“It is not a trend in the industry. It will happen only in those cases where the land costs are extremely attractive and the builder has a comfortable liquidity position,” he adds.
The company has stayed away from aggressive land buying over the last 2-3 years.
No frenzy likely
Real estate consulting firm CBRE too does not foresee the return of land frenzy seen in 2007-2008. “Companies are not rushing into transactions. They are more cautious and evaluating deals carefully on parameters such as potential for development, location, margins and valuation,” says Mr Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis South Asia Pvt. Ltd.
The Hindu Business Line, August 31, 2009, Page 15
--------------------------------------------------------------------------------
Coinciding with the return of buyer interest in select pockets of the residential market and the improved liquidity position of builders, land auctions are inching back into the spotlight.
--------------------------------------------------------------------------------
Moumita Bakshi Chatterjee
The slowdown in the property market, induced by the global meltdown and negative sentiments, had dealt a body blow to the mega land deals, in the country. But the gloom seems to be finally lifting. Coinciding with the return of buyer interest in select pockets of residential market and the improved liquidity position of builders, land auctions are inching back into the spotlight.
Consider this. DLF Ltd recently made headlines when it walked away with 350.7 acres in Gurgaon, for an estimated Rs 1,750 crore, marking one of the largest land deals in the country. The prime land, on the Gurgaon-Faridabad road, had been put on the block for re-bid after the only bidder in the first round (DLF) had drawn attention to certain difficulties in project implementation.
HSIIDC (Haryana State Industrial & Infrastructure Development Corporation) re-invited bids in July this year with easier terms and conditions, including staggered payment plan spread over seven years. This time, DLF clinched the deal with its winning bid of Rs 12,000 per square metre — two other bidders did not qualify on technical grounds.
The land in the Delhi suburb would be used for development of commercial, residential, sports complexes, and an 18-hole golf course. DLF, however, remains tight-lipped about the project, but sources say that the land deal is “positive” for the company, given its proximity to South Delhi on one side and the existing golf course on the other.
DLF is not the only one going after such transactions. Earlier this year, Anant Raj Industries decided to set aside nearly Rs 400 crore from its cash reserves, to acquire land for upcoming residential projects.
So are the land deals back in reckoning, after a long dry spell? Industry experts believe that land acquisition will gather pace, but will remain largely need-based.
“The market definitely is improving, new projects are being launched and the cash flow, for builders, is getting back in shape on the back of QIP issues and some proposed public offers that are being lined-up,” says Mr Manish Aggarwal, Executive Director, Investment Services, Cushman & Wakefield (C&W) India.
Time to buy
While the conditions are turning positive, the biggest clincher clearly is land valuation. In many cases the land prices have corrected nearly 60-70 per cent, says an industry observer.
Agrees Mr Amit Sarin, Director and CEO, Anant Raj Industries. “It is the best time to buy land — the valuation is a fraction of the 2007-level. Everyone is announcing low cost and affordable housing projects and the main ingredient of low cost in real estate is the land cost, not construction cost,” Mr Sarin points out.
But Anant Raj Industries, itself a zero-debt company, expects land buying to remain selective for a while.
“It is not a trend in the industry. It will happen only in those cases where the land costs are extremely attractive and the builder has a comfortable liquidity position,” he adds.
The company has stayed away from aggressive land buying over the last 2-3 years.
No frenzy likely
Real estate consulting firm CBRE too does not foresee the return of land frenzy seen in 2007-2008. “Companies are not rushing into transactions. They are more cautious and evaluating deals carefully on parameters such as potential for development, location, margins and valuation,” says Mr Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis South Asia Pvt. Ltd.
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