An Article about "Trends In Real Estate Sector"

Trends In Real Estate Sector

The partial revival of the residential property market following last year's crash and money raised from qualified institutional placements(QIPs) is allowing bigger real estate companies to buyout builders who haven't recoverd from the slump. The pile-up of assets is the consequence of a three-year boom, during which landowners without any track record or expertise in property development, turned overnight into builders to cash in on the bubble. Many small builders would have concluded land payments and now would not be having money to build who can depend on a big brand name to sell and for bigger builders the land which they buy will be available at a reasonable price. There are several such opportunities in a market where there is still a credit crunch and smaller developers are looking for a rescue. These are good opportunities for bigger developers because it reduces at least two years of work and makes it easier to start the project.

Large firms believe that it is a better business model to form joint development agreements with smaller, local partners rather than buying out the land or forming a joint venture. Joint development agreements, in such cases, are suitable because they acquire the property and then give back a percentage of the built-up land to the small builders. In such cases, the larger developer, of course, provides and looks after aspects like construction finance, marketing and sales of the project. It is a win-win situation for both small and bigger developers and small developers are smart in tying up with a bigger developer, which has a good track record and brand value, to jointly develop a project.

Real estate companies such as Akruthi City Ltd, Sunteck Realty Ltd, Orbit Corp. Ltd, Oberoi Constructions Pvt Ltd and Sunil Mantry Realty Ltd are picking up stakes in distressed assets or taking over completely from smaller developers stuck with land parcels without the money to build on them. Such assets carry the added advantage of having approvals in place and therefore being quicker to complete. Over the past few months, Akruthi City Ltd., have concluded three deals, picking up stakes in projects in Mumbai from small firms that have been stuck after buying the land during the boom. The company has plans to build residential projects with land it has acquired from distressed sellers and these projects will be renamed and sold under the Akruthi banner, it was told.

Orbit Corp. has set aside Rs.150 crore, part of which has been raised from its QIP in August, to buy distressed assets, which was one of its aims of the fund-raising programmed. The company is negotiating with three developers who are also land owners for properties in south and north Mumbai.

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