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Realty developer House of Hiranandani is looking at acquiring distressed real estate assets as smaller players find it difficult to survive in the new regulatory regime and amidst a tightening of credit supply to the sector.
“So far, we have only been monetising our land bank, but now we will also look at distressed assets. We have already identified several opportunities in this regard and have tied up a few land parcels. We are in the process of tying up several more,” Surendra Hiranandani, founder and MD, House of Hiranandani, told BusinessLine .
The scenario in the post-RERA [Real Estate (Regulation and Development) Act] era has prompted many cash-strapped local developers to tie up with organised players. With the advent of RERA, meeting deadlines is important and collaboration helps in completing projects within shorter timelines. “It reduces the capital outgo by developers as the focus is on construction funding and delivery rather than land acquisition. It allows better cash-flow management, which leads to a reduction in overall project costs,” he said.
Bringing value
Most well-established builders are now joining hands for joint development as it offers a cost-effective alternative to tedious land-buying processes. Hiranandani said the advantage of joint development projects is that it helps monetise projects faster and brings them greater value. “Projects having the backing of an established brand have performed well when it comes to sales and timely delivery.”
In joint development contracts, the land owner brings in the land, and the cost of development and construction is borne by the developer. The land owner gets a percentage of the sales revenue or a percentage of the constructed area in the project or both.
The company’s focus geographies are Mumbai, Bangalore, Chennai, and Hyderabad. “We want to continue focussing on these, with the addition of Pune. We have gained excellent traction in these markets and hope to capitalise on the credibility and customer base we have acquired. The strong local teams and knowledge base in each of these locations will further support our expansion here,” he added.
Limited absorption
Hiranandani currently has four residential townships under development in Bengaluru and Chennai spread across six million sq feet worth nearly ₹2,500 crore. “Our aim is to build additional 1.5 million sq feet by 2019,” he said.
In terms of new projects, he said the company was focussing on launches in both the residential and commercial asset classes while staying away from city-centric, high-end projects where it sees limited absorption going forward.
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