Track2Realty Exclusive: Land as the major input of real estate business is still attracting a premium though land assembling at the cost of project execution has backfired on the fortunes of many realty companies in India.
Track2Realty studies the major land deals in the last one year to conclude project execution and serving the interest on loan has taken precedence over the pipeline visibility of the sector.
Some land deals nevertheless will continue to defy the trend in the year ahead, but no land purchase is expected for just creating land bank.
Conventional demand and supply wisdom of economics suggests short supply of a scarce commodity with expected price barrier in future attracts hoarding. Buyers even tend to go over drive when the product falls into non-perishable commodity.
In the business of Indian real estate land assembling has for long been the driving factor with realtors more focussed on assembling land instead of execution of launched projects. The downturn in the last four years, however, taught them a lesson that financial sustainability is more important than the pipeline visibility.
Many developers known for land buying spree have, of late, woken up to the reality of dried funding options, stalled projects, exiting investors and overall unsustainable business model.
And hence even though land assembling getting costlier and cumbersome post-Land Acquisition Bill, the land bank is something that is at the bottom of the developersâ€™ focus now.
Facts speak for themselves. As per realty consultancy Cushman & Wakefield (C&W), India has witnessed around 25 per cent decline in land deals with expected revenue of around Rs 15,000 crore in the year 2012, as against land deals worth Rs 20,000 crore in 2011.
According to C&W, India had seen the transactions worth just around Rs. 7000-8000 crore in 2012 (till October).
Of course, sales of housing units have fallen by about 30 per cent across the country in the last one year.
“The market sentiment is very negative. This year we may see land deals worth Rs 15,000 crore happening across various locations in the country,” Cushman & Wakefield (C&W) Executive Managing Director (South Asia) Sanjay Dutt says.
â€¦to be continued