| The real estate tiger is on the prowl again. And, | | | | has to see these announcements of trophy deals |
| it's hunting for big-ticket details. Last week it | | | | carefully. Some command a premium due to the |
| found its prey – the Rs 4,050-crore deal for a | | | | snob value attached, emotive reasons such as a |
| 25,000 square metre plot of land in Wadala, | | | | prior history and in some cases the convenience |
| Mumbai. This could indicate that the buyers' | | | | factor. An isolated deal is not indicative of a pricing |
| appetite for land transactions has increased in the | | | | trend." |
| real estate market after a lull of over 18 months. | | | | As far as the land auctions are concerned, what |
| Renewed sales, improved liquidity and accessibility | | | | is important is the per square feet of FSI for |
| to capital has led some developers to look at | | | | which an amount has been paid and not the |
| building fresh land banks. | | | | absolute quantum paid. Assess the nature of what |
| How do big-ticket deals influence prices of | | | | you can construct on the plot and the terms of |
| property in the neighborhood? These set a | | | | payment, and then make a comparison. A |
| benchmark for property prices and most have | | | | four-acre plot with FSI of 20 will go for a certain |
| the ability to excite buyers interest and create | | | | amount and another with less FSI for a different |
| artificial price situations. The values of upcoming | | | | price. If one were to consider this aspect, one will |
| projects in the area also shoot up following such | | | | realise that what is effectively being paid is |
| deals. Realty experts contend that the trend will | | | | materially not vastly different from the going rate |
| continue more such transactions taking place this | | | | in that area. That's perhaps the reason why |
| year. | | | | Pankaj Kapoor, founder of Liases Foras, contends |
| Setting a benchmark | | | | that the "Wadala deal is not an expensive deal". |
| The questions that such deals raise are: In case | | | | Often, some developers consciously dole out high |
| of a land auction, would the deal affect prices of | | | | amounts for land deals. |
| projects in the vicinity and in case of a secondary | | | | "This may be in anticipation of a change in FSI |
| sale? Also, would the price set a benchmark for | | | | regulations in a particular area or in anticipation of |
| properties in the area or would it remain a one-off | | | | them (developers) being able to avail of certain |
| transaction? Real estate experts believe the | | | | schemes pursuant of which they are entitled to |
| residential real estate market is a highly | | | | incremental FSI," points out Mavani. |
| ‘neighbourhood-driven business' and prices in | | | | One must also remember that the developer can |
| the vicinity are immediately impacted by such | | | | only launch a specific type of project on such |
| deal, the Wadala deal being a case in point. A day | | | | big-ticket land parcels and these are usually |
| after the deal, the asking price for upcoming | | | | high-end apartments or for that matter premium |
| properties in the area almost doubled from Rs | | | | commercial projects in order to leverage the high |
| 8,500 per sq ft to anything between Rs 10,000 to | | | | cost of land. The builder wants to make the most |
| Rs 12,000 per sq ft. | | | | of his investment. |
| Closer home, when DLF bagged the 350.7 acres in | | | | BPTP bagged a 94 acre plot in Noida in 2008, for |
| Gurgaon for Rs 1,750 crore in 2009 and paid Rs | | | | which it worked out Rs 5006 crore. |
| 1,675 crore for 38 acres of land in west Delhi in | | | | Following the slowdown, it gave back 72.83 acres |
| 2007, it established a benchmark for land | | | | to the authority and kept 21.17 acres, launching an |
| transactions in those areas. | | | | integrated commercial project on the same plot in |
| "Residential real estate is highly | | | | April this year called Capital City. |
| neighbourhood-driven business and high-value deals | | | | This will have a 5-star hotel, retail and |
| have the ability to excite buyer interest. The | | | | entertainment zone, corporate suites and even |
| news of such a deal has the ability to excite | | | | service apartments. |
| buyer interest, simultaneously creating an artificial | | | | Future deals As for the future, one can expect |
| price situation. Upcoming projects may also get | | | | more such deals this year. Government-owned |
| valued at a higher price following the deal," says | | | | entities such as the National Textile Corporation |
| Aniruddh Wahal, director, DTZ International | | | | (NTC), Mumbai Metropolitan Region Development |
| Property Advisors. | | | | Authority (MMRDA) and Railway Land |
| But, are these prices sustainable? Not in the long | | | | Development Authority (RLDA) have either |
| run, say experts. "Such deals have a tendency to | | | | initiated or hastened the process to sell land to |
| cause market distortions. My worry is that these | | | | cash in on the revival of interest in big-ticket deals. |
| prices are not sustainable in the long run. There | | | | Big-ticket commercial and deals are possible in |
| may be a possibility of a correction if there is no | | | | Delhi- NCR area soon after the Commonwealth |
| real demand," says Samantak Das, national head, | | | | Games in October-November this year, points out |
| research, Knight Frank India. | | | | Ramesh Menon of Certes realty. |
| As far as secondary sales are concerned, (such | | | | "Some industries in the Shivaji Marg area in west |
| as the at the Samudra Mahal – a duplex | | | | Delhi are waiting for conversion approvals and |
| apartment in a Worli building that fetched a price | | | | have applied for land use concessions. Once that |
| building that fetched a price in excess of Rs 36 | | | | happens, there may be some big-tick- et deals |
| crore at an auction a few months ago) real | | | | happening in that part of town too," says Santosh |
| estate experts are of the view that such | | | | Kumar, CEO, operations, JLLM. |
| transaction are not representative of the | | | | Last but not least, big- ticket realty deals point to |
| residential market but can safely be considered | | | | the urgency of having a real estate regulator in |
| one-off sales. | | | | place. |
| "Though it's true that highend apartments will | | | | "It is absolutely imperative to implement |
| continue to fetch high values, a small-sized | | | | policy-level reforms which advocate establishment |
| apartment in the same area (where a big-ticket | | | | of a regulatory body to curb unnecessary |
| deal has taken place) may not fetch the same | | | | profiteering and establish standardised guidelines. |
| price as pedigree buildings are very few and not | | | | Unless there is a strong code of practice |
| all apartments are of the same size." | | | | standards and ethics adhered to by practicing |
| The size is what will matter if one were to draw | | | | professionals, the sector will remain vulnerable to |
| comparisons," says Pawan Samy, MD, West India, | | | | market shocks and failures and will lack public |
| Jones Lang LaSalle Meghraj(JLLM). | | | | trust and confidence," adds Sachin Sandhir, MD, |
| Jai Mavani of KPMG con- curs, "Secondary market | | | | Country Head, RICS (The Royal Institution of |
| deals are best considered as one-off deals. One | | | | Chartered Surveyors) India. |