Indian Real Estate Developers Project a Surge in Land Acquisitions
Aiming to sustain the current momentum, real estate developers in India anticipate that land transactions will reach 3,000 acres in fiscal year 2024. This projection represents a substantial 59% increase from the preceding year.
Key Data and Market Trends
According to data furnished by Anarock, a property consultant, residential properties representing 2,258 acres were sold during the initial nine months of FY24. Subsequent anecdotal evidence, combined with exchange filings diligently tracked by Businessline from listed developers, suggests that the surge in land procurement has continued, potentially adding another 600-700 acres during the current quarter.
For instance, Godrej Properties embarked on a significant acquisition spree during the March quarter, allocating over ₹400 crore for more than 15 acres in Hyderabad and an additional ₹506 crore for a 6.5-acre plot in Noida. Furthermore, through a collaborative joint venture, the company intends to develop a sprawling 62-acre township in Bengaluru. In a similar vein, Mahindra Lifespace recently acquired a 9.4-acre parcel in Bengaluru.
Experts' Insights on Land Availability
According to Saurabh Rathi, managing director and co-head of Motilal Oswal Alternates, both publicly traded and privately held entities have shown significant activity in land acquisitions. He notes that land parcels available from corporations, the government, and other landowners, have further increased transactions, particularly within the Delhi-National Capital Region and the Mumbai Metropolitan Area. Notably, land transactions in Gurgaon alone have surpassed ₹3,000 crore over the past two years.
Anarock’s data further indicates that the Mumbai Metropolitan Region and the Delhi-National Capital Region have seen the most transactions, with Bengaluru and Hyderabad following closely behind as real estate hotspots.
Shift from Light to Heavy Assets
Rathi points out a transition toward land acquisitions since mid-2022. In pursuit of an asset-light model, Developers entered into joint development projects between 2019 and early 2022, while landowners capitalized on their real estate holdings to generate revenue. Smaller developers, however, faced project delays attributed to insufficient funding.
Rathi notes that developers are increasingly opting for full buyouts or acquiring their former development partners.
While the new supply totaled 4.5 lakh units, an unprecedented 5.3 lakh units were sold in 2023. Real estate entities are expanding their land portfolios in anticipation of future volumes. The existing disparity between supply and demand has contributed to escalating prices.
Factors Influencing Land Availability
Currently, there is more land accessible. Corporations are divesting non-core land assets to generate revenue. Bombay Dyeing, under the ownership of Nusli Wadia, divested a 22-acre plot in Mumbai, securing ₹5,200 crores from a Sumitomo Realty division. Moreover, Runwal Developers acquired a 4.13-acre plot in Lower Parel from Kansai Nerolac for ₹726 crore in December, having previously received ₹655 crore from the sale of a 24-acre Thane plot to the House of Hiranandani.
Additionally, local state authorities, including CIDCO in Maharashtra and the Haryana State Industrial and Infrastructure Development Corporation, consistently auction parcels for both residential and commercial purposes.
Rathi emphasizes that the extraordinary demand for land has propelled price increases. Over the past two years, the price per acre has increased by 50-60% in Pune and the Mumbai Metropolitan Region (MMR), while land prices in Hyderabad have doubled.
Compared to two years prior, when the transaction’s value was projected to range between ₹25,000 and 30,000 crore, his current estimates place it between ₹35,000 and 40,000 crore.