Realty developers cut down land banks for funds
Sluggishness in Indian economy is having its negative impact on developers. Many cash-crunch developers have been diluting their land banks by selling chunks of licensed land in in township projects to raise funds and accelerate the execution of projects.
In a recent instance, renowned Jaypee Group, a well diversified infrastructure and industrial conglomerate, has sold floor space index (FSI) covering 300 acres of licensed land located on the Yamuna Expressway to another reputed builder Gaursons India for around Rs 1,600 crore.
It has been heard from close sources that now Gaursons is planning to sell smaller FSIs on this land to other local builders. Gaursons, in a project in Noida Extension, had earlier sold smaller FSIs to small builders. The developer believes that since the market is slow at present, this route will surely be beneficial to the company in improving demand.
In a similar context, Delhi-based Vatika group has sold FSI of 2.2 million square feet to three reputed developers- Ashiana, Assotech and ATS. The residential land is at a township project in Gurgaon spread across 300 acres.
Real estate experts opine that instead of one developer developing a large project at a liquidity-crunch scenario, it is better to share the work among two or more developers. Apart from sharing the burden of investment as well as losses, if any, a group of developers together developing large projects would also improve the speed of project execution and helps in creating a healthy competition in the market. While large townships usually take over eight-ten years to get completed, with multiple developers working on one such project, these developers can hope to complete a 100 to 300 acre projects within seven years.
Though the prime reason for selling FSIs is to acquire funds for projects, it also works as a strategy in cleaning out developers’ portfolio, opined a real estate expert. That is why more and more developers are following this route in the recent months.
For the plot in Gurgaon that Assotech bought from Vatika, the former paid around Rs 175 crore. The 10.5 acre plot has already acquired all clearances required for a group housing project. As the development is taken care by a group of developers, buyers will see that many activities are happening in the township, which will further boost the demand. However, with few developers working on the project, the construction is likely to complete faster than any other township being developed a single builder.
Indiabulls Real Estate is also joining the line by selling 10 acres of its land in Gurgaon to Paras Group for around Rs 200 crore. Orris Group has also sold FSI of 100 acres land in a township named ‘Greenbay Village’ on Yamuna Expressway to ATS Infrastructure Ltd. The company was looking for a partner who can add value to the large township project and also can quicken the development work.
