Indiabulls Real Estate to launch several projects outside Mumbai

Bangalore: Indiabulls Real Estate Ltd is set to launch as many as seven projects outside Mumbai in the remaining part of 2012-13, a move that could help the company hedge against the over-exposure to its core market.

The firm will launch primarily residential as well as office projects in Sonepat, Gurgaon, Indore and Chennai, according to a company presentation released post its quarterly results announcement late Tuesday.

Having said that, Indiabulls still has a high-value portfolio of projects in and around Mumbai, including a newly launched township in Savroli on the Mumbai-Pune expressway. Mumbai and its neighbourhood constitute more than half of Indiabulls’ portfolio in terms of project value. “The strategy is to focus on metro markets such as Mumbai and Greater Mumbai, NCR (National Capital Region that includes Delhi) and Chennai,” said Saurabh Mittal, co-founder and vice-chairman, Indiabulls Real Estate.

While most of the firm’s Mumbai projects are in the luxury category, it has no specific pricing for its projects outside the region. “We are looking to do projects in both premium and mid-market categories to cater to both kinds of buyers, depending on the location,” said Mittal. The projects are subject to regulatory approvals.

Since April, the Mumbai-based developer has launched two projects—a super-luxury residential project, Blu, in south Mumbai, and IB Golf City in Savroli, a premium residential township with a golf course.

Indiabulls relaunched Blu earlier this year, and it is now being sold at a base price of around Rs.45,000 per sq. ft. The project is coming up on mill land that the firm bought in 2010 for about Rs.2,000 crore. Indiabulls plans to re-launch the first of its Sky projects in Lower Parel, Mumbai, as well by the end of 2012 with new specifications.

According to the presentation, the company had a total saleable area under construction of 19.44 million sq. ft as of 30 September. Of this, 10.35 million sq. ft has been sold for Rs.6,583 crore and the remaining space is expected to sell at Rs.13,074 crore as per the current market rates.

Indiabulls Real Estate has done nearly Rs.1,200 crore of pre-sales in its projects across India, of whichRs.900 crore was from projects in the Mumbai Metropolitan Region (MMR).

The company had a land bank of around 3,589 acres and added another 212.09 acres in the September quarter. “Most of it (the land) is for future development with a three-five years horizon,” said a person familiar with the development.

Macquarie Research, in a 4 October India property report, said Indiabulls Real Estate’s over-exposure to high-end residential property in Mumbai was a risk because of high speculative and investor interest.

“If Indiabulls’ project portfolio outside MMR takes off well, it would be a balancing factor because the dependence on the Mumbai property market would cease and it would also boost its sales numbers,” said an analyst with a domestic brokerage, who didn’t want to be named.

For the September quarter, Indiabulls posted a net profit of Rs.32.24 crore, down 17.43% from a year ago and down 14.59% from the preceding June quarter. Total income from operations rose marginally by 0.7% year-on-year to Rs.342.30 crore, and by 59.45% sequentially.

In August, Canada-based Veritas Investment Research Corp. targeted Indiabulls Real Estate andIndiabulls Power Ltd in a report saying the purpose of the former firm seemed to be to bilk institutional and retail investors for the benefit of select insiders. Indiabulls retaliated by initiating legal proceedings.

Why is realty sector seeing sudden churn at the top?

Some say slowdown, others call it maturity and growth

The crunch-hit real estate sector is experiencing top-level churn, after long.

The managing directors of at least two real estate companies -- Indiabulls Real Estate and Peninsula Land -- quit recently. So did the real estate heads of two property funds, Indiareit and Everstone Capital. They are either moving to other realty companies, starting their own ventures or shifting streams to join consultancies.

Early last month, Vipul Bansal, the  joint managing director of Mumbai-based Indiabulls Real Estate, who spent seven years with Indiabulls group, joined another developer DB Realty in Mumbai as its chief executive.  This week, Rajesh Jaggi, managing director of Ashok Piramal Group company Peninsula Land who was with the group for 14 years, moved to Everstone Capital, a fund management company promoted by Sameer Sain, as managing partner of the real estate business.

Among the real estate funds, Ramesh Jogani, managing director and chief executive of Ajay Piramal group’s Indiareit,  quit the firm to set up a venture. Jogani was a property developer before joining the fund manager.

Earlier this month, Shishir Baijal, partner, Everstone Capital, joined Indian arm of global real estate consultant Knight Frank as country head and managing director after its chairman Pranay Vakil retired and its vice chairman Pranab Dutta was made the chairman.

Even consultants have seen top level changes. In May, Sanjay Dutt, the chief executive at property consultancy Jones Lang LaSalle (JLL) quit to join another consultancy Cushman & Wakefield as executive managing director. In June, JLL  announced it had hired Cushman’s Anurag Mathur as its new CEO, project and development services and head, emgering businesses.

Why so much churn in a sector where top level changes are far and few in between?

E Balaji, chief executive and managing director at human resources company Randstad India, links the churn with the slowdown in the sector.
 
“One broad inference is that when a sector is going through difficult times, when sales are down and profitability is under pressure, companies make managements accountable for that. They expect quick turnaround and such churn could be a result of that,” Balaji adds.

According to realty research firm PropEquity, NCR has seen a drop of 30 per cent and 50 per cent in absorption of residential units in June and July of 2012 compared to corresponding months of the previous year. Mumbai Metropolitan Region has seen a dip of 28 per cent and 30 per cent in June and July 2012 respectively.

Some others say the growth and maturity in the sector is responsible for the churn.

“The industry is getting deeper and wider. It has really developed over the last seven years. Earlier talent used to come from outside. Now it has grown large enough that talent within is moving around,” says Dhanpal Jhaveri, parter and chief executive at Everstone Capital.

At least half-a-dozen big realty companies, namely DLF, Oberoi Realty, HDIL, Godrej Properties among others have tapped capital markets in the last six years and listed on the exchanges.

According to Pranay Vakil, former chairman of Knight Frank India: “Though I do not have an answer for the sudden churn in the sector, I believe the sector has matured now and enough talent with adequate experience is available now.”

V Hari Krishna, director, Kotak Realty Fund, refers to the churn in the property funds as a “seven year itch”. “Since lives of most funds are coming to an end after their 7 to 8 year fund life and most of the guys had been there for that long, churning is bound to happen,” Krishna adds.

Why then are top executives hopping from realty companies to private equity and from PEs to consultancies?

Says Vakil: “developers, funds and consultants are very well related and it depends on what side of the table you sit. If you sit on one side of the table, you can understand how the other party reacts.”