Piramal Realty to foray into development management biz, value housing

Piramal Realty, the real estate arm of Piramal Group, is getting into development management business and value housing to augment its revenue.

 

Under development management, a developer takes care of the design, construction, marketing, and sales of a project for a fee from the original landowner/developer.

 

“Many banks and non-banking financial companies are coming to us to finish stuck projects. We are evaluating such proposals,” said Anand Piramal, founder, Piramal Realty.

 

Against the traditional development management model, the company would also raise funds and partake of the project profits.

 

“We can do four to five such projects,” said Piramal, adding it makes sense to get into such arrangements since the development management fees have shot up to 16-18 per cent of project revenue.

 

Top property developers, such as Godrej Properties and Shapoorji Pallonji Real Estate, are also in this segment. Godrej is also investing its own capital in the land owned by the partner.

 

Piramal said land parcels are today available at 15-20 per cent lower prices, compared to the 2015 rates.

 

“Earlier, owners and bankers were not willing to accept losses. Today, they have become more rationalised about prices,” he said.

 

Piramal denied it is a late entrant to this segment. “Markets were worse than what we had imagined. If we had picked up stressed projects or land parcels earlier, we would have faced more challenges. It is a deliberate strategy to take advantage of lower prices and less liquidity in the system,” he said.

 

Piramal Realty is looking to clock sales of Rs 2,000 crore in the current financial year. It has done sales of Rs 1,250 crore in the April-December period.

 

The company is also launching value housing in its project in Thane near Mumbai. The apartments will start with an area of 350 square (sq.) feet (ft) at a price of Rs 60 lakh, he said. The value housing will be spread over 2 million sq. ft in the project, he said.

 

Piramal said the upcoming projects would also have a value housing component. The company plans to spend Rs 3,500 crore over the next three years, which includes investments in value housing as well.

 

“It is a reflection of the market (to give smaller sized apartments). But we also need to give flexibility to buyers,” he said.

 

Piramal said the residential prices have remained flat, and the company has followed a granular pricing. “We have come out with offers for slow-moving inventory,” he added.

 

The company plans to add 10 million sq. ft to its portfolio (to 17 million sq. ft) in the next financial year, and launch three to four projects.



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