Land sells for cheap in Mumbai and this real estate company is taking advantage
SUnteck Realty Ltd. was the first to spot a business opportunity ten years ago, when he acquired land in Mumbai’s next financial district and built homes for wealthy bankers. Now, as a result of a prolonged money crunch and the pandemic, he again sees a good deal brewing.
The land is selling for 20% to 30% off in India’s most expensive property market, according to the builder. It acquired around 9 million square feet last year and is in talks to purchase more in 2021.
“Good deals have been available during the pandemic; we have made three major acquisitions, among the most important of the past seven years, ”President Kamal Khetan said in a telephone interview. “The landowners are desperate now, they are chasing the developers. It’s a buyer’s market. “
Sunteck avoided buying land at the start of the previous decade, after selling houses in the Bandra Kurla complex to individuals including former Citigroup chief Vikram Pandit and Indian billionaire Uday Kotak. A few years earlier, the area was a low-lying parcel prone to flooding from the nearby Mithi River; today, it is home to the Indian headquarters of banks including Citi, as well as the US Consulate and several five-star hotels.
The rapid development of Mumbai – like BKC – has fueled prices as well as easy access to liquidity from shadow lenders. However, in recent years, these financiers have been in crisis and the pandemic has worsened the blow to the real estate market, offering a consolidation opportunity to companies with low debt, strong cash flow and a proven track record of carrying out projects.
Sunteck has a total land reserve of approximately 40 million square feet, of which approximately 80% is developed through joint ventures or joint development agreements. In the latter case, the builder shares part of the income with the landowner instead of buying the land outright. On average, Sunteck shares 25% of the income.
“If there is an attractive distress sale, we can buy and invest,” Khetan said. “However, at the moment there are many opportunities available in the light asset model.
He added that the discounts will likely benefit buyers. Sunteck intends to finance its land acquisitions through internal accruals. Reservations rose 6% to 3.7 billion rupees ($ 50.2 million) in January-March, giving it its highest ever collection of 7.8 billion rupees in the fiscal year until March.
“We have consolidated our presence in the Mumbai region,” Khetan said. “We are now looking to grow exponentially, we are seeing three times the growth in the next 3-4 years.” – Bloomberg
Also read: The future real estate sentiment index hit by the second Covid wave: report
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