Akruti City to sell land to tackle credit woes

Written by Mona Mehta | Mumbai | Updated: Aug 5 2009, 05:58am hrs
Hit by severe liquidity crunch, Akruti City Ltd is now in the process of selling 15 different medium to small land parcels, originally meant for development of commercial and residential projects, in Mumbai, Thane, Pune and Ahmedabad.

Further, the company is in the process of converting its four upcoming commercial complexes into residential apartments in Mumbai and Ghatkopar. These include, the upcoming Akruti Jewel, Akruti Shikhar and Akruti Lakewood. The company had seen a 97% dip in net profit and 95% dip in sales turnover for the quarter ended June 30, 2009.

Hemant Shah, chairman, Akruti City said, "By selling off medium to small sized land parcels, we hope to recover Rs 400 to Rs 500 crore in this financial year. We are currently talking to other top builders in the real estate industry. By converting commercial complexes into residential projects, we plan to offer 3,000 apartments and generate a valuation of Rs 400 to Rs 500 crore." Akruti City, currently, commands a land bank of over 40 million square feet in the prime locations of Mumbai, Thane, and Pune.

As for the rationale behind the move, Shah explained, "The enquiries and occupation for residential apartments is always faster, in comparison to providing occupation on lease to corporates. In residential project development, just when any residential project is at a conceptualisation stage, the inquiries start emerging from end-buyers. Also, the margins and return on investment is higher in residential projects, as compared to commercial."

It was in third and fourth quarter of the financial year 2008-09 that Akruti City had started putting its real estate plans on hold due to economic slowdown and credit crunch. Shah said, "We did not go ahead with our warehousing plans. We had earlier planned an initial investment of Rs 250 crore and was looking at Rajasthan, Gujarat and Madhya Pradesh to build big wholesale markets. Akruti had planned to enter the education segment as well, which also has been on hold."

Pawan Swamy, MD (western India), Jones Lang LaSalle Meghraj said, "Converting commercial project into residential is easier. This is because, the bulk of office growth depends on the growth in the global economy which is not yet happening. In fact, there is a zoning problem if industrial projects are converted into residential."

According to Shah, Akruti City is also evaluating plans to raise huge funds through qualified institutional placements (QIPs) in the next two to three months. However, he refused to divulge further details on the valuation.