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Land prices shoot up as stressed assets sold out

Top developers such as Godrej Properties, Oberoi Realty, Mahindra LifeSpaces, among others bought land parcels.

Saurabh Shatdal, managing director, capital markets at Cushman & Wakefiled, said demand across asset classes has significantly picked up post lockdown and there has been significant churn in real estate supply.
Saurabh Shatdal, managing director, capital markets at Cushman & Wakefiled, said demand across asset classes has significantly picked up post lockdown and there has been significant churn in real estate supply.

By Raghavendra Kamath

Land prices have shot up 30-40 % across the country since 2019, as parcels of stressed developers/land owners are being sold out. Besides, land parcels currently are fully priced, said developers and consultants involved in such deals.

“Earlier big developers were negotiating with smaller develoepers whose projects were stuck and got value benefit. Those land parcels were sold out. Today, land parcels are owned by traditional owners who are not stressed.Hence they are demanding higher prices than before,” said Mayank Saksena, chief executive, land services at Anarock Property Consultants.

Sakena said since sales velocity is good now, it is supporting higher prices. “Consolidarion is still happening. Today those who have excess land parcels or those changing strategy are selling their land parcels. The sellers also include a select few who have gone to NCLT,” Saksena said.

According to Anarock, about 28 land deals for over 1,237 acres were signed between January to May 2022. In contrast, the January-June period of 2021 saw just 14 land deals for a total of 763 acres .

Top developers such as Godrej Properties, Oberoi Realty, Mahindra LifeSpaces, among others bought land parcels.

Developers agree with Saksena.”Cleaner land parcels available with traditional owners have seen price revision due to paucity. With confidence in sales coming back in a big way, there are many buyers now in the market. The turnaround in the residential real estate market is also adding momentum to this increase in prices,” said Mohit Malhotra, managing director, Godrej Properties.

Godrej bought a number of land parcels in cities such as Pune, Bengaluru, Haryana and others in the last couple of months.

Malhotra said from a short-term perspective, there appears to be further room for an uptrend in prices, buoyed by the rising sale prices of apartments/plots and so on. However, in the longer term, he expects the prices to stabilise in line with the stabilisation of end-product sale prices.

Saurabh Shatdal, managing director, capital markets at Cushman & Wakefiled, said demand across asset classes has significantly picked up post lockdown and there has been significant churn in real estate supply.

“This resulted in some key markets in each city emerging as hot destinations for new developments resulting in high demand for land. Land being one of the most important raw material for real estate witnessed great demand and hence the land prices have appreciated by 15-20% in such markets. However, this is not something which has happened across the board,” Shatdal said.

He added that leading developers continue to sell well and to support the rising demand, uptake of new projects has become a key strategic move for almost all organised developers. “The historic gap in valuation of land prices has reduced given the ability of developers to pay more resulting in multiple transaction closures,” he said.

He said three types of developers are investing in new projects. The first ones are national developers who have a strong brand and healthy balance sheets. The second are strong regional players who are backed by private equity players and the third category includes strong players in specific micro markets which have been prudent in managing their cashflows and have grown sustainably.

Abhishek Kiran Gupta, chief executive at data analytics firm CRE Matrix, said new land purchase is limited to large developers. Brownfield redevelopment projects are on considerable rise and are being primarily picked up by smaller developers, he said.

“Only large developers can afford to buy large tracks of land towards building large townships. We would like to strongly reiterate that Indians are structurally migrating towards community living compared to standalone housing properties,” he said.

Recent deals

 March 2022 : Godrej Properties acquires a 9 acre land parcel in Pune

April 20222: Godrej Properties buys 58 acre land in Nagpur

April 2022: Mahindra Lifespaces buys 11.5 acre land in Pune

May 2022: Oberoi Realty inks 18 acre Thane land deal.

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