DB Realty, the Mumbai-based property developer, is in talks with major real estate companies for joint developments in two of its prime properties in the city which are valued around Rs 3,000 crore, said two persons with knowledge of these talks.
The first property is located in the tony Bandra Kurla Complex, which has a development potential of a million sq ft. The second one at Kala Nagar in Bandra has a potential of 500,000 sq ft. Residential apartments sell for around Rs 20,000 a sq ft in these two areas.
According to the sources, DB's bankers are in talks with Mumbai-based Rustomjee, which is looking at the deal seriously. When asked, a DB Realty spokesperson did not offer any comments. A Rustomjee spokesperson said: “We have received the proposal and like any other proposal, we are looking into it.”
DB was earlier in the news for the arrest of its key promoters, Shahid Balwa and Vinod Goenka, in connection with the telecom spectrum scam.
The BKC project operating entity, MK Malls & Developers Pvt Ltd, has UK-based Trinity Capital and IL&FS Investment Managers as main investors. The Kalanagar land was bought by DB's promoters from the Wadias of Bombay Dyeing.
“The idea of the joint development is that Rustomjee could bring execution skills, construction finance and other expertise, DB will share the development profits while continuing to hold the land,” the person said. “DB is looking at sharing the development risks, given the tight liquidity conditions in the markets.”
BACKGROUND Recently, DB sold 50 per cent stake in its South Mumbai property to the Adani group to raise funds for the company. Many developers have opted for sale of land or development rights, given the sharp decline in home sales and tightening liquidity in the market.
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“Banks have become extremely selective while lending and on Monday you do not get any loans below 14 per cent. Selling assets is a natural course of action for many now,” said a property developer who did not want to be named.
According to PropEquity, a realty research firm, the number of homes sold and registered in Mumbai have come down from 6,300 units in August 2010 to around 4,500 units in August 2011, a decline of 28.5 per cent. The trend has been the same in the past couple of months.
“Rising interest rates and input costs, coupled with delayed approvals, have resulted in a slowdown in the sector. At DB Realty, we see a slowdown in sales, coupled with an increase in input costs in the last six months. However, we have registered a stable quarter in terms of profitability by making progress in our key projects and parameters. Also, the sale of some non-core assets has contributed to the increase in profit for the quarter. We have also managed to reduce our debt burden in this quarter and the bank debt as at the end of the quarter stands at Rs 242.5 crore and with a debt equity ratio of 0.07,” said N Shridhar, group director (business & strategy), while announcing the first quarter results of the company.
DB has 25 projects in various stages of construction. Recently, it acquired a 50 per cent stake in DB Hospitality, an unlisted firm where Shahid Balwa and Vinod Goenka held 80 per cent stake.