Realtors in Delhi-NCR Enter Into Joint Ventures With Financially Strong Developers
New Delhi: NCR Realtors Enter Into Joint Ventures With Financially Strong Developers
Property developers in the Delhi-NCR region are partnering financially strong developers from the country’s South and West to restart stuck realty projects in the backdrop of a constant cash crisis, the powerful Real Estate Regulatory Act (RERA), and the warning of being taken to the National Company Law Tribunal (NCLT).
Financially sound companies like Godrej Properties, Prestige Group, and Kalpataru Group have entered into joint ventures, joint development and development management agreements in the country’s most comprehensive property market by volume.
A joint venture or development management agreement sets a large developer in the driver’s seat as the new player gets charge of the new entity. On the other hand, the established developer’s track record and knowledge to manage cash movements support project execution and marketing.
“Local developers are unable to develop on their own and are under the warning of being taken to the NCLT as buyers favor corporate developers with a better track record. Southern developers, who have better financial conditions, are capable to get good projects with lower risks as the local partner takes care of the approvals,” said Mudassir Zaidi, executive director (North) of real estate consultant Knight Frank India.
He further added saying that the internal rate of return for projects has also split to almost 18% over the last decade.
In recent agreements, Prestige has gripped a 50% stake from DB Realty in a mixed-use hospitality project in Aerocity, while Godrej Properties has enrolled in an agreement with Lotus Group to develop a township project in Noida’s Sector-150.
Irfan Razack, Chairman, and Managing Director, Prestige Group said, “This vital joint venture will help us make an impressive entry into the Delhi-NCR region. We will continue to invest and influence our expertise to build an extensive range of real estate developments over key locations in India. This transaction is in line with our plan of constant, focused acquisition, and profits on merger events”.
The real estate sector in India is suffering from a rigid liquidity crisis due to the decline in the residential property part, with many builders struggling to pay their loans to shadow bankers. The property market was broadly affected due to demonetization in 2016, followed by policy reforms such as the enactment of RERA and GST.
“We are looking to procure projects under development management agreements and the joint venture model in the Mumbai Metropolitan Region and the National Capital Region as there are many such opportunities,” said Tribeca founder Kalpesh Mehta.
Tribeca, the builders of Trump Towers in India, procured two mixed-use projects from the Logix Group in Noida under a joint venture and development management agreement.
Delhi-NCR contributes 62% of the 454,000 units that have been suspended or blocked across the country and is one of the top non-performing markets in terms of apartment sales – according to real estate tracker JLL.
“The city has also witnessed new launches down by 14% in the first half of 2019, compared to the same period, seeing a downward trend since 2015,” Knight Frank India said.
