Real Estate market in India and Unitech's Coup!

Unitech has bought 345 acres of prime land in Noida for a staggering Rs 15.82 billion. This is fairly bold when you consider the total size of Unitech itself is Rs 16 billion! For this deal they beat the No. 1 DLF to the post. The major plus of this land is that it is just 15 minutes from the posh Maharani Bagh in New Delhi. They will make 4000 top-of-the-line apartments at Rs 2 crore each!

Although the markets in India – specially the real estate – seem to be booming, it might be a speculative bubble. As one analysts said that only 25-30% of the residential property is inhabited – the rest is part of the speculation activity. Almost 75-80% of Unitech’s invetsment is hitherto in residential type properties – which might create issues for it in future if the market tanks. However, since the builder can finance 50% of the project cost through advances from the future residents, the IRR is twice that of Commercial Property!

Unitech is however build “land banks” across the country – with a total of 8000 acres across Gurgaon, NOIDA, Kolkatta, Kochi, Hyderabad, and Chennai!

Unitech is also aggressively entering other areas of the realty market. It is setting up two amusement parks in Rohini and NOIDA. It is going to franchise the Cartoon characters from Cartoon Network and Pogo. It is also planning to set up Marriott’s Courtyard brand of hotels across the country. It will require Rs 700 crores of investment.

The group plans to use Realty Funds in the US. Why? This is why:

Using realty funds to raise money is standard practice in the US. The advantage is that you can draw the money only when you require it, and the payback time is after seven years. In case of public equity, you need to service the entire money you have raised from day one.

The property market in the country is zooming and booming! The builders all over the country are busy buying up land in unprecented numbers. Here is a list of who is buying what:

  • The Sahara group owns 19,000 acres across the country. Of this, a sizeable amount is held by the highly touted Amby Valley project on Mumbai’s outskirts, where it has over 8,000 acres of land. The company is selling luxury apartments and chalets in this space.
  • DLF has a land bank, which is in various stages of acquisitions of over 4,270 acres of land. And it is valued at over Rs 80,000 crore (Rs 800 billion).
  • Unitech has built a land bank of over 8,000 acres across the country, which is valued between 75-125 per cent of DLF’s valuation.
  • Delhi-based Ansal has built a land bank of over 4,000 acres, which includes Gurgaon, Ghaziabad, Lucknow, Karnal, Meerut and Agra. It expects the land bank at current prices to have a value of Rs 10,000 crore.
  • The Vatika group has been the new kid on the block in Gurgaon, and has a land bank of 3,000 acres, of which a third is in Gurgaon and the rest in Jaipur and Sohna.
  • Industry estimates suggest the Hiranandani group has 4,000-5,000 acres across the country. In terms of value that could be pretty high.
  • Mumbai-based Housing Development and Infrastructure, which struck a deal with the Adanis for developing 48 acres in Mumbai’s Bandra-Kurla complex for Rs 2,250 crore (Rs 22.5 billion), has enough land to create 40 million square feet of space.
  • The big boys in the south include Brigade, RMZ, Mantri and Sobha Builders. According to industry experts, the prominent developers in Bangalore together control 2,000-3,000 acres.

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