Increased Land Acquisition by Real Estate Developers in India
Driven by substantial housing demand, real estate developers across India are accelerating their land acquisition strategies. This trend, observed in 2023, continues into 2024, with builders actively pursuing land, especially in major metropolitan areas. This begs two pertinent questions, however: Why are we witnessing a surge in land deals? And which acquisitions are making headlines in 2024? Let's delve deeper into that analysis.
Industry analyses predict a rise in real estate by approximately 10-15 percent, reaching nearly 300,000 units in 2024, as real estate magnates persist in their extensive land acquisition spree. Focusing on metropolitan regions, developers are actively seeking untapped localized markets to capitalize on the escalating housing demand. This activity has significantly increased land transactions in notable Indian cities. We will examine builders' land acquisition trends for 2023 and 2024, along with factors driving skyrocketing housing demand.
Significant Land Acquisitions by Developers
Major developers across India are observing an upswing in property acquisition momentum, fueled by both direct acquisitions and joint venture deals. A prime example is DLF Ltd.’s recent Rs 825 crore acquisition of a 29-acre plot in Gurgaon’s Golf Course Extension, boasting a development potential of 7.5 million square feet. Simultaneously, TREVOC Group concluded a Rs 100 crore arrangement within Gurgaon’s Golf Course.
In January 2024, Macrotech-listed Lodha Developer acquired a 100% stake in Pune’s Goel Ganga Venture. Reputed developer Gulshan Homz procured a 2.5-acre plot in Sector-129, Noida for Rs 150 crore and is developing a 90-unit residential project in collaboration with Uttar Pradesh regional partners in Moradabad.
Godrej Properties further fueled this trend by acquiring a 4-acre Bangalore plot, anticipating a development potential of approximately Rs 1,000 crore, solidifying their presence in the Bangalore property market. Godrej gained recognition in the past financial year for its strategic property purchases, acquiring 18 additional parcels of land. These are projected to generate a revenue potential of roughly Rs 32,000 crore, with Rs 15,000 crore targeted for 2024.
Smaller local developers face obstacles in acquiring land amidst these acquisitions by major players. Developers are expressing dissatisfaction with bidding guidelines outlining eligibility and financial benchmarks for a 24-acre parcel in Bandra, Mumbai. The stipulation of a Rs 15,000 crore net worth for bidders is criticized for potentially excluding many smaller developers from the Bandra Reclamation Project.
Factors Driving Increased Housing Demand
The Confederation of Real Estate Developers’ Associations of India (CREDAI) states that housing demand is projected to increase to approximately 93 million residential units by 2036, underscoring the sustained growth in residential sales. Given rising living expenses, the question of why this demand remains strong arises.
“Homebuyers’ demand has an increased interest cost environment resulting from elevated inflation, the strong domestic economic fundamentals, and the increasingly aspirational attributes of residential real estate,” says Shishir Baijal, Chairman and Managing Director of Knight Frank India. “However, the trend is apparent in the primary residential markets across the country.”
Key Land Acquisitions in 2023
While the year 2024 started strong, several notable acquisitions took place in 2023 as well. Some of these key deals:
- BPTP Developers acquired a 5.2-acre parcel near the Dwarka Expressway in Gurgaon for Rs 87 crore.
- Chintels India transferred land parcels near the Dwarka Expressway to the Sobha Group for Rs 121.82 crore.
- Graphite India sold 1.02 lakh square meters of land to TATA Realty in Bangalore for Rs 986 crore.
- Casa Grande secured a four lakh square foot deal in Hyderabad for Rs 56.8 crore.
- Oberoi Realty entered the Delhi NCR market with a Gurgaon land purchase for Rs 597 crore.
- Birla Estates acquired a 28-acre plot in Sarjapur, Bangalore for residential development.
Emerging Trends in Land Investment
Industry experts highlight key investment trends shaping decisions for upcoming fiscal years. The focus on Tier-1 cities persists as major builders acquire and prioritize developments in surrounding areas. Yet, Tier-2 and Tier-3 cities concurrently offer substantial investment opportunities. Reports indicate that builder brands are shifting their focus towards the untapped markets of Nagpur, Panipat, and Ludhiana. The Mumbai Metropolitan Region (MMR) remains a preferred investor destination, driven by lower entry costs and appreciation potential, attracting considerable investor interest. Developers, recognizing the sustained housing demand surge, are actively capitalizing on this favorable climate. Analysts forecast robust land acquisition activity in Tier-1 metropolitan cities and developing zones throughout 2024.