Real estate developers are back to buying land parcels as inventory overhang eases and developers build project pipelines to ease demand-supply mismatch in the top cities of India. While the land prices are holding firm, there is a mix of assets available with some stress assets in the market too.
On Wednesday, Godrej Properties announced the acquisition of a 7-acre land parcel in the heart of Bengaluru in Indiranagar for an undisclosed sum. However, according to property consultants, the land rates in that area are currently in the range of Rs 15 crore to Rs 20 crore per acre depending on the location, land area, road access and connectivity, among others. At this rate, the valuation of the land bought by Godrej would be between Rs 105 crore and Rs 140 crore. The residential housing prices in Indiranagar, which is a prime residential area are in the range of Rs 11,000 to Rs 14,000 per square feet, depending on the project and the location.
The project is estimated to have a booking value potential of about Rs 750 crore and a developable potential of around 0.6 million square feet of saleable area and will be developed as a premium residential project comprising apartments of various configurations.
“Availability of land parcels and infrastructure development has turned Bengaluru into a mature real estate market with increased demand for high-end residential development. This will further strengthen our presence in the city and complement our strategy of deepening our presence in key micro markets across India’s leading cities,” said Mohit Malhotra, managing director and CEO of Godrej Properties.
This transaction is among the growing list of land deals that have been completed since the beginning of 2022. In a recent report by ANAROCK, there were 28 separate land deals transacted in the first five months of 2022 cumulatively accounting for over 1,237 acres across the country. This doubled in the last year, as the January-June period of 2021 saw just 14 land deals for about 763 acres get completed.
It is not just the developers but also players with financial wherewithal who are eyeing prime land at key locations across India to deploy developments across real estate asset classes.
Some of the leading developers and entities who bought land parcels for residential developments include Godrej Properties, Oberoi Realty, Mahindra LifeSpaces, Gaurs Group, Birla Estates, Hetero Group, Microsoft, and Mapletree Logistics, among others.
Mahindra Lifespaces earlier this year acquired two land parcels of 11 acres in Pune and 9 acres in Kandivali — a suburb to the north of Mumbai. Arvind Subramanian, managing director and CEO of Mahindra Lifespaces had told FE that there has been a flurry of land deals given the strong surge in demand from homebuyers, which started right after the first lockdown and has particularly strengthened in the last nine months. While the land prices are hardening, he said that the spiralling construction costs are a bigger concern.
The Mahindra Group company is looking to acquire a few land parcels in the remaining of the financial year as well to build housing projects with sales potential of Rs 3,000-4,000 crore.
Mumbai-based Runwal Developers had also acquired a 20-acre land parcel in Thane earlier in June, which is understood to have been bought at Rs 471 crore. Sandeep Runwal, managing director of Runwal Developers said, “Real estate has had two good years of sales, so developers are looking at creating further inventory, which is driving land acquisitions. Land prices continue to remain firm, but there is a mix of assets available. It is dependent on location and condition of the land parcel, and there are stressed assets available as well.”
Bengaluru-based Sobha also acquired a 2.5-acre land parcel in the Velachery micro-market of Chennai in June.
Nearly 1.7 lakh units have been added in January-June 2022 across the top seven cities of India and 1.8 lakh units have been sold. The new launches and sales in the first six months of 2022 are almost 3/4th of what was launched and sold in 2019 as well as 2021, indicating high sales activity.
“The Indian housing segment has been performing exceedingly well since the beginning of this year. This depicts the scale of activity that the market is currently witnessing. Inventory overhang in January-June 2022 is at 22 months and has declined rapidly from the previous peak of 55 months in 2020. So, all-in-all, the market seems to be in a comfortable position, and this is one of the key reasons why land deals are happening now,” said Prashant Thakur, senior director and head, (research) of ANAROCK Group.