Investor interest in land deals set to touch new highs

Written by Mona Mehta | Mumbai | Updated: Aug 27 2009, 05:47am hrs
The Indian realty sector may witness better investor interest in land acquisitions during Q3 FY10 comprising up to 20% of the foreign direct investment (FDI), according to industry experts. In comparison, Q3 FY09 witnessed 12% of FDI being invested in land acquisition, thanks to the global meltdown during Q3 and Q4 of FY09. Currently, residential real estate constitutes 80% of the Rs 10,000 crore overall realty market.

According to Suman Memani, associate vice-president, Religare Securities Ltd, During the first half of 2008, 54% of the Rs 11,345-crore FDI was invested in land acquisition. With FDI in land acquisition in metros expected to grow by 12% to 20% in the third quarter of financial year 2009-10, the remaining investments by FDI would be made towards infrastructure projects, property projects and construction costs.

FDIs expected growth in land acquisitions comes at a time when top builders in metros are in the process of acquiring distressed assets. Delhi-based Anant Raj Industries, with Rs 750 crore cash surplus, is in the process of acquiring distressed assets in the form of land acquisition as well as properties in National Capital Region (NCR), its president-finance, Yogesh Sharma told FE. According to Sharma, Our talks are currently on with NCR-based developers. Post acquisition of distressed assets, we plan to develop residential and commercial buildings, for which we are also open to joint ventures.

Mumbai-based National Textile Corporation (NTC) mills need surplus cash to revive their textile mills and are in talks with 16 top developers to sell their mills. NTCs Kohinoor Mills, Poddar Mills, Finlay Mills and Digvijay Mills are likely to be auctioned, according to an industry source.

Residential real estate is all set to see a revival since a high point of its slump during Q4 FY09, when the realty sector saw a significant dip in overall FDI investment into residential real estate due to economic slowdown and developers were forced to reduce realty prices by 25% to 40%. This is evident in the rise in value of property registrations post-Diwali this year.

With the pick-up within investors and end users, realtors are witnessing buyers booking affordable apartments. Religare Securities has recently released a realty sector report that states that affordable housing (AH) is witnessing a steady increase nationally. DLF recently booked 1,356 apartments in a single day at its project, Capital Greens, in New Delhi.

Indiabulls Group which recently launched an AH project in Gurgaon, has already closed 100 bookings. Mumbai-based Kalpataru project on LBS Marg in Ghatkopar witnessed a sudden sale of 50 flats after the rate for a two-and-a-half bedroom apartment was reduced from Rs 98 lakh to Rs 82 lakh.

Kalpatarus residential project in Thane saw 110 flats sold in 10 days in February after the rate was fixed at Rs 3,100 per sq ft. HDILs Kurla project, priced at Rs 5,300 per sq ft, has seen 400 flats being snapped up even though the actual construction is still to commence. Meanwhile, DB Realtys Dahisar project has registered bookings for 1,400 flats. Its other project at Kandivali (West) registered a sale of 400 apartments at a reduced rate of Rs 5,700 per sq ft, as mentioned in the report.