Godrej Lends Helping Hand to Realty Sector
Mumbai-based Godrej Properties is looking to take over some under-construction projects in the national capital region (NCR)-including in Gurgaon -where developers are unable to sell or give delivery to their customers or are short of funds.
"We have been approached by developers, who are not able to sell their units, for joint development. We will give our brand name, construct and sell their projects," Mohit Malhotra, executive director, Godrej Properties, told Business Standard.
Lending a brand name to help sell houses in a project started by another developer could well turn out to be a trend, given the piling inventory of unsold residential units and hardly any sign of revival in the industry. Other companies, including Sunil Mittal-promoted Bharti Realty, have also been approached by developers for joint development of projects in NCR, an executive said.
Pankaj Kapoor, managing director, Liases Foras, a real estate research firm, said, "Developers, who are stuck with their projects or have bought land earlier at a high price, are now selling in distress to other developers in Mumbai." But taking over an under-construction project to jointly develop it, attaching a new brand name and selling, is yet to catch up, an analyst said.
Malhotra refused to share the name of developers with whom Godrej Properties is in talks, and only said they were 'big names'. He said the company was looking for clean land-with all licences and approvals in place -and expects a deal to be signed soon. Typically, the realty arm of the group prefers to go for a joint venture model with land owners rather than outright
"We charge a certain percentage of top line as fees. Our brand adds premium to the project and we ensure from cash flows that the project gets completed," he said.
The sector has been going through a slowdown. It is witnessing declining sales, high inventory and liquidity crunch for the past couple of years. According to data from Liases Foras, by the end of the March quarter, the inventory (unsold and sales) in NCR stood at 335.2 million square feet, out of which unsold was at 321.7 mn sq ft and a total 71 months of inventory.
Inventory in months denotes the time required to clear the stock at the existing absorption pace. A healthy market maintains an inventory of eight to 12 months but there have been delays ranging from three to five years across many projects.
Reference - http://www.business-standard.com/article/companies/godrej-lends-helping-hand-to-realty-sector-115072700024_1.html
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