Realty slump forces builders to look outside state



Low profit margin and a saturated market in Ahmedabad and better opportunities in other cities are pushing the real estate companies in the city to look outside Gujarat. Several developers are planning to set up residential projects in cities like Bangalore, Mumbai and even Dubai.


While companies like Arvind, Adani and Goyal have announced their projects, sources said that others like Iscon, B Safal and Bakeri are also mulling projects outside the state.


Arvind real estate has ambitious plans of coming up with innovative offerings and mega projects in Bangalore catering to residential and commercial space. Local developer Goyal has already completed a project in Bangalore and plans to start another. Another developer Bakeri is said to have invested in five acres of land in Bangalore, but has not planned a project so far.


Amplus Realty Fund, an Ahmedabad-based real estate dedicated private equity fund, has made its first investment in Bangalore instead of Ahmedabad as part of a joint venture with Bangalore-based developer Assetz Homes. Amplus plans to invest over Rs 110 crore through equity investment, debt and customer advances for a mid and high-end residential project in Bangalore.


Similarly, Adani’s Mumbai project is under construction, while Iscon Group is planning to set up a project in Dubai. Sources said that city-based B Safal group is also exploring options outside Gujarat.


“There are better opportunities outside Gujarat now, especially in Bangalore where the land is available at the same rate as Gujarat but the selling rate is double. Fast and smooth selling and similar FSI norms make Bangalore a lucrative market for Gujarat’s developers, who are facing a slump and low profit margin in Ahmedabad at the moment,” said Monil Parikh, an Ahmedabad-based property consultant.


As compared to some new residential projects, which are selling above Rs 6,000 per square feet, most projects in Bangalore offer a stable rate of Rs 5,000 per square feet. Experts also attribute Bangalore’s attractiveness for Gujarat’s developers to its heavy dependability on the IT sector, which they plan to leverage.


“Instead of risking sales by concentrating on a single, difficult location, companies are looking at other stable markets. The sales in other cities, especially Bangalore, are prompting companies from Gujarat to plan projects there. It is a good strategy,” said NeerajTomar, head-Ahmedabad operations at JLL.


Source: Indian Realty News dated July 7, 2014