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Moumita Bakshi Chatterjee

New Delhi, Aug. 15 The downturn in the real estate sector may well turn out to be an opportunity for large developers to cherry-pick some great deals from the market.

Cash-strapped smaller builders are now approaching established players to sell their land and projects at attractive rates or, in some cases, even in distress sales.

Over the last few months, a slew of developers, including Parsvnath Developers, Uppal Group, Omaxe and JMD, have either acquired land or projects from smaller builders, or are in active negotiations to snap up such deals.

“Many players, who rushed into the market during boom time, did not have requisite experience to consolidate land or to develop projects and they now face execution pains, given the tight liquidity. To us, this provides a good opportunity,” Parsvnath Developers’ Chairman Mr Pradeep Jain said. The company has acquired land in such “deals” over the last few months for integrated township projects.

The market is currently rife with three kinds of offers — where the smaller builder does not have the marketing muscle to execute the project; where the project has been partially sold but the player does not have the confidence to generate future sales; and where land has been acquired in patches (not contiguous stretch) and the player is facing hurdles in its consolidation.

“For large developers, land consolidation is not an issue as they have the ability to offer more for parcels that smaller builders were unable to acquire. Moreover, if land consolidation issues persist, the established developers have the capability to hold onto existing land parcels,” said Mr Ajay Mangal, Director (Finance) of Uppal Group, which has picked up a fully-sanctioned project for group housing in Northern India.

Omaxe, too, made one such outright buyout for a residential project in Faridabad about three months ago, and continues to scour the markets of Bangalore, Hyderabad and Mumbai for more.

“Many of the new entrants forayed into the market and acquired land in 2006, when real estate prices had peaked, and are now left high and dry due to lack of response to their project,” Mr Rohtas Goel, Chairman and Managing Director, Omaxe Ltd, said.

JMD is also scouting the market for good buys, and according to its CMD, Mr Sunil Bedi, the company is negotiating with one or two potential sellers.

Such offers, says the industry, are quoting at over 10 to 20 per cent discount now that the market sentiments are more realistic. “Previous valuations are not making sense anymore and local builders, who had undertaken large projects beyond their capacity are now open to sell-outs or joint ventures,” said Mr Sanjay Dutt, Joint Managing Director, Cushman and Wakefield India.

More Stories on : Outlook | Real Estate & Construction

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