Meet the new age landlords

As big real estate companies like DLF, Unitech, HDIL and others consolidate their business and sell land to deleverage, several new names such as Lodha, Runwal and Piramal in Mumbai and ATS, 3C, and Supertech in the national capital region have bought the highest number of land parcels in the past couple of years.

While some are cash rich, others are backed by private equity funds.

When property markets were still subdued in Mumbai, the country’s commercial capital saw land deals worth Rs 4,400 crore last year, marked by big deals of these new-age landlords. While 2013 was dull in land deals, 2012 was a big year, with Rs 8,194 crore worth of deals.

Take the Lodha group. Promoted by Mangal Prabhat Lodha, it has bought land parcels worth Rs 12,000 crore in Mumbai and even in London in four years. Lodha has about 5,800 acres. Approximately 45 million sq ft is under construction.

Significant among the group’s buying are acquisitions of an 88-acre parcel of Clariant Chemicals in Thane for Rs 1,154 crore in 2014, DLF’s plot in Lower Parel in Mumbai for Rs 2,727 crore in 2012 and prime properties in London.

Abhinandan Lodha, deputy managing director of the group, says it is looking for value in acquisition. “As an example, the land we acquired from DLF is worth at least two times the amount we paid, based on other sales in the area. Similarly, the two properties we acquired in London have risen over 50 per cent in value in just a year,” he said.

The cash-rich Piramals have also lapped trophy properties in Mumbai. The Ajay Piramal group bought Hindustan Unilever’s Gulita for Rs 452 crore and the Mafatlal Mills plot for Rs 605 crore. The Ashok Piramal group, named after Ajay Piramal’s late brother, bought Bishopgate for Rs 272 crore and the New Great Eastern Mills land in Byculla for Rs 650 crore last year.

As many developers battled slowing sales and mounting debt, some like the Runwals saw this as an opportunity to buy land at lower valuations.

“When the market is down, it is the best time to buy land parcels,” said Sandeep Runwal, director at the group, which bought land from Crompton Greaves in the Kanjur Marg area of Mumbai for Rs 1,015 crore last year.

In 2013, Runwal bought a two-acre land parcel in the Worli area of Mumbai from shipbuilder ABG Shipyard for Rs 245 crore.

“We are at the lower end of the down-cycle. Soon, we will be at the beginning of the up-cycle,” said Runwal on the opportunities for developers.

In most of the transactions, developers have used internal accrual and debt to buy land.

For instance, after buying land from DLF, the Lodha group said it was planning to use internal accrual and private equity funds to pay for it. The group claims it has revenues of Rs 8,000 crore in the past two financial years and expects to clock sales of Rs 9,000 crore this financial year.

The Runwal group has also raised PE money and debt to fund acquisitions.

According to reports, the Runwal group raised Rs 200 crore from HDFC Property Fund to buy land from Crompton Greaves in Mumbai. Similarly, it reportedly took Rs 100 crore in debt from the Kotak Mahindra group’s non-banking finance company and another Rs 70 crore to fund the acquisition of ABG Shipyard’s plot in Mumbai in 2013.

“In today’s scenario, land acquisition in MMR is happening largely on two counts, one by large developers with strong balance sheets that have the ability to raise equity and debt, and the other on account of consolidation in a tough market from small to mid-size developers to larger developers,” said Sharad Mittal, head of the real estate business at Motilal Oswal Private Equity Advisors.

Oberoi Realty also raised Rs 750 crore by selling non-convertible debentures to part-purchase a 25-acre piece of land in the Borivali area of Mumbai from Tata Steel.

Barring certain land buys in posh localities such as South Mumbai, developers are focusing on mid-income housing for the plots they have purchased.

“We bought land wherever we can build mid-income projects. We are building mid-income housing on about 80 per cent of the land we bought,” said R K Arora, chairman of Supertech, who claims he has bought 1,000 acres of land in Noida, Greater Noida and Gurgaon.

Even the Lodha and Runwal groups, constructing premium projects in South and Central Mumbai, are focusing on mid-income housing projects in the Thane area in their latest launches.

LORDS OF LAND
Abhinandan Lodha, Deputy MD, Lodha group

LAND BUYS
  • 88 acres from Clariant Chemicals in Thane for Rs 154 crore in 2014

     
  • DLF’s plot in Lower Parel in Mumbai for Rs 2,727 crore in 2012

     
  • Macdonald House in London for Rs 3,000 crore in 2013

Subodh Runwal & Sandeep Runwal, directors at Runwal group

LAND BUYS
  • Crompton Greaves’ property in Kanjur Marg area of Mumbai for Rs 1,015 crore in 2014

     
  • Two acre parcel in Mumbai from  ABG Shipyard for Rs 245 crore in 2013

Getambar Anand, chairman and MD, ATS Infrastructure

LAND BUYS
  • 100 acres from Orris group for Rs 500 crore in 2013

     
  • 14-acre plot in Gurgaon for Rs 150 crore in 2011