Distressed sales in costliest Indian home market lure Sunteck Realty
Ltd. was the first to spot a business opportunity a decade ago, when it snapped up land in Mumbai’s upcoming financial district and built homes for wealthy bankers. Now, as a fallout of a prolonged cash squeeze and the pandemic, it sees a bargain brewing once again.
Land is selling at 20% to 30% discounts in India’s most expensive property market, according to the homebuilder. It acquired about 9 million square feet last year, and is in talks to purchase more in 2021.
“Bargain deals have been available during the pandemic; we did three major acquisitions which were among the largest in the last seven years,” Chairman Kamal Khetan said in a phone interview. “Landowners are desperate now, they are chasing developers. This is a buyer’s market.”
Sunteck avoided buying land early in the previous decade, after selling homes in Bandra Kurla Complex to individuals including Citigroup’s former head Vikram Pandit and Indian billionaire Uday Kotak. A few years earlier, the area was a low-lying plot prone to flooding from the adjoining Mithi River; today it boasts the Indian headquarters of banks including Citi, as well as the U.S. Consulate and several five-star hotels.
Rapid development in Mumbai — such as BKC — fueled prices together with easy access to cash from shadow lenders. Since a couple of years though, these financiers have been in crisis and the pandemic worsened the blow to the real estate market, offering an opportunity for companies with low debt, strong cashflows and a proven project-completion record to consolidate.
Sunteck has a total land bank of some 40 million square feet, about 80% of which is being developed by joint ventures or joint development agreements. In the latter, the builder shares a part of the revenue with the landowner instead of buying the land outright. On average, Sunteck shares 25% of revenue.
“If there is an attractive distress sale, we may buy and put in capital,” Khetan said. “However, at the moment, there are many opportunities available in the asset-light model.”
He added that the discounts will probably trickle down to buyers. Sunteck intends to fund its land acquisitions through internal accruals. Bookings rose 6% to 3.7 billion rupees ($50.2 million) in January-March, giving it its highest ever collection of 7.8 billion rupees in the financial year through March.
“We have consolidated our presence in the Mumbai region,” Khetan said. “We are now looking to grow exponentially, we see three times growth in the next 3-4 years.”
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