Real Estate

Covid forces alternative models to realty cos in land banking

Anil Urs Bengaluru | Updated on January 04, 2021

There has been steady interest for credible Grade A developers   -  Getty Images/iStockphoto

In order to survive the Covid-19 pandemic, real estate companies and developers have altered their strategy of holding land banks for long-term to just-in-time land buy for property development.

Change in strategies has led to the emergence of two sets of companies in the sector. The first group - branding, construction, developing and marketing of available land. Here major developers such as Godrej, Birlas, Prestige and Brigade have adopted this plan.

The second group - they just focus on land acquisition, securing approvals, ground breaking and then take it to the development stage. Here realty-focussed funds are the major players.

“This is a great way of moving forward. Here their specialisation is not compromised, but their core domain expertise is tested for a win-win solution,” Mayank Saksena, MD & CEO- Land Services Anarock, told BusinessLine.

Cost of borrowing for companies is also playing a crucial role, Bijay Agarwal, MD, Salarpuria Sattva group, said.

Borrowing cost

“The average borrowing cost for real estate developers has come down considering the consistent push from RBI for reducing rates and the same has partially been passed on to customers. However, keeping in view the present situation, we do not expect the rates to be slashed to any more considerate percentage,” he said.

Bengaluru has historically been a stable and consistent land market that reflects in the layout- based town planning of the last five decades. “This being an appreciating asset, there has been a robust consumer interest in buying plots to build own homes,” said P Ravindra Pai, Managing Director, Century Real Estate Holdings.

“Customers who earlier used to view these as weekend getaways are now exhibiting extensive interest in gated and plotted land projects,” he added.

Now during Covid, as seen in the last few months paradoxically has been witnessing a considerable interest from the market for credible Grade A developers.

“Bengaluru meets the definition of a good real estate market that has adequate breadth branded inventory and developers now are looking to leverage the market and make up for their gains that were impacted in the last two quarters,” explained Pai. He added, “There is also a renewed interest from the rental segment by availing good schemes and home loan rates. Additionally, families are scouting for larger configurations to accommodate parents and small office/home office options.”

Published on January 04, 2021

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