After a short lull in the land transaction market during the time of recession, the market is again buzzing with land deals on the back of improved economic environment.
However, real estate developers, who have learnt their lessons during the time of recession, are relying on joint development plans than outright sale of land parcels.
“Land transactions have started happening in the market with better outlook of the economy. However, many real estate companies still prefer joint development agreements as against outright land purchase as it reduces the equity exposure and increases the number of transactions that a developer can engage in,” Karun Varma, managing director-Bangalore of real estate consultancy firm Jones Lang LaSalle Megharaj said.
He, however, said that land deals are not confined to the real estate companies, rather spread across sectors that were planning to set up their units in Bangalore.
As per sources, while Maruti Udyog (Automobiles) had bought around 2 acres of land on Bellary road for building up a brand centre, NetApp bought around 15 acres of land in Whitefield.
Among Bangalore-based real estate companies, Prestige Developers bought 13,000 sq ft of land at Edward Road and HDFC Real Estate Fund bought around 40,000 sq ft of prime real estate land located off Kasturba Road. HDFC’s land parcel is proposed to have a high-end residential centre in the near future.
Sources in the real estate industry also said that companies like Godrej, Shriram Properties, RMZ Corp and Prestige Developers were in constant look out for land parcels in the city.
“Companies with IPO plan in near future want to build up a sound land asset base before hitting the market as sound land base helps in enhancing the valuation of a company,” a top executive of real estate consultancy firm said.
However, industry experts said that most of the land deals were not ‘distress sale’ by real estate companies.
“We don’t see a distress trend in the market as of now. Developers that had huge land portfolios available for sale in the market last year to reduce leverage have pulled back such transactions from the market,” Varma said.
He also said that most land sellers in the market were land bankers or land owners.
Regarding appreciation of land value in near future, Varma said, “ We don’t see an appreciation of more than 10 per cent in next four quarters as many developers are still sitting on a huge land bank that need to be developed. So, lack of effective demand will not push prices to higher level.”
