Leading builder and developer Parsvnath created a buzz a month ago when it submitted applications to the Department of Telecom (DoT) for providing Unified Access Services in 22 telecom circles across the country. This was followed by Unitech, Indiabulls, DLF and now Omaxe. But, before you think why real estate developers are making a beeline for telecom these days, hold a minute. Telecom is not the only sector that they are looking at these days ? they are now getting into healthcare, education, airport management, hospitality etc. in a diversification spree like never before.
Why have suddenly realty majors decided to foray into unrelated fields? The reasons range from easy cash flow in the real estate sector to the astuteness on the part of the realty doyens not to put ‘all their their eggs in one basket.’
?Normally in any given industry the fear factor comes where the industry has reached its saturation point. That is the time companies start diversifying into other greener pastures. But real estate has probably started suffering from problems of plenty. Going by the dynamics and prospects of the industry, I don’t think there is any compelling need to diversify. Yes, some of the point realty players are diversifying as they want to grow and set new benchmarks,? says Sanjay Kackar, COO, AEZ Group. ?Take telecom for instance. It is the most emerging sector in India today and real estate developers probably want to cash in on the boom. Also, by diversifying, they make their business model more sustainable. In case the realty sector goes in for a decline after a few years, at least their telecom business will give them the much needed revenue,? says a property expert.
Adds Pradeep Jain, Chairman, Parsvnath Developers, ?With the government following an open policy on spectrum, we want to use this opportunity for providing unified access service on a pan India basis, including rural telephony. This is a great opportunity for the company to diversify into a new business area, which is continuously growing. Despite the increasing number of subscribers, the penetration of mobile telephony in India is still low compared to developed countries. Once number portability is introduced, it would offer immense business opportunity to new entrants.?
The licence for Unified Access Services would entail a 2G licence for GSM and a triple play of various services like IPTV, Wi-Max, internet, broadband and any other services relating to the signal.
Realty major, Unitech Ltd also recently announced its foray into the growing telecom sector in the country. The company informed the National Stock Exchange that ?the Board of Directors at a meeting took on record that eight of its wholly-owned subsidiary companies have decided to submit applications to the DoT, Ministry of Communications and Information Technology to provide Unified Access Services (UAS) in 22 telecom circles across the country.? The Board noted that the continuous rapid growth in India’s telephone services business indicates the enormous potential for future growth. Further, it would help boost the group’s telecom and transmission tower manufacturing business. Thus, investment in this sector would provide immense potential for value addition to the group.
After Parsvnath and Unitech, Indiabulls, DLF and Omaxe too announced their entry into the telecom sector. However, these telecom forays will probably be done through a special purpose vehicle, in partnership with an international player. Agrees Jain, ?Talks are on with various international investors, but since this is a very initial stage, we would not be able to disclose neither the investments, nor the name of the international player that we are talking to.? Adds Sanjay Chandra, MD, Unitech Ltd, ?We see the potential in the telecom business and believe that investment in this sector would provide immense potential for value addition to the group. We are in talks with leading telecom players and also financial investors for partnership.?
Speaking on his company’s strategic move, Rohtas Goel, CMD, Omaxe Ltd. said, ?The recent trend clearly shows that the telecom sector is growing at a fast pace and will be the main contributor both to the growth of the country as well as to the financial welfare of the investors. We feel that our experience and organization will be as successful and valuable in the communication infrastructure as our past records and achievements in the real estate sector. We are sure that although a late entrant in this field very soon we will join the leading pack.?
The other sector that seems to have caught the fancy of the real estate developers is healthcare. Close on the heels of DLF and Ansal API, realty major Emaar MGF too has jumped onto the healthcare bandwagon by entering into a Memorandum of Understanding (MoU) to form a joint venture with Fortis Healthcare to develop hospitals in Tier I and II cities across the country. According to sources, the company is expected to enter into many more such strategic alliances with other national and international operators in a bid to become a big player in the field of healthcare. As per the DRHP filed by Emaar-MGF recently, the company intends to develop hospitals, clinics and medical centres for primary, secondary and tertiary healthcare facilities, primarily in their master planned communities. ?We intend to enter into strategic alliances with specialist service providers and operators, which could be in the form of joint venture relationships, operations and management contracts, franchisees or other models. Our aim is to ensure that each of our master planned communities have world-class healthcare facilities,? said the company.
Apart from healthcare, the company is also planning get into education ?to ensure that our master planned communities have the necessary facilities of schools and/ or other educational institutions such as professional education colleges and vocational institutions.?
The other sector that is eliciting a favourable response from realty majors is airport modernization and development. Emaar-MGF has entered into a memorandum of understanding with Dubai Aerospace Enterprise (DAE) Limited to tap the burgeoning airport upgradation market in India. Together, they will explore potential areas of co-operation and identify and evaluate the design, construction, expansion, renovation, modernisation, commissioning, maintenance, operation, management and development of existing and new airports in India.
Finally, the most sought-after sector these days is hospitality. Ansal API has floated a special purpose vehicle (SPV) with Ambience Hospitality Management to build 30 hotels at various locations at an investment of Rs 2,000 crore. Emaar-MGF has already signed up with Premier Inn for 80 budget hotels. Other developers who have jumped onto the hospitality bandwagon are DLF, Raheja Group and, Eros.