Projects are stuck due to weak financials and sales, loss of faith in the developer and delay.
Bengaluru: Nearly five years after DB Realty Ltd launched Orchid Heights, the premium residential project in south Mumbai’s Mahalaxmi area will be relaunched as One Mahalaxmi around Diwali this year.
The project was stalled for some years before Radius Developers signed a development management contract with DB Realty last year to develop and market the remaining apartments.
Radius will relaunch another upmarket project, off Hughes Road in south Mumbai, which was launched by Hubtown Ltd, but failed to take off. The project, One Hughes Road, will be completed by Radius in partnership with Hubtown. The development management contract for the project has also been signed.
“Projects have been stuck for either weak sales, delays or poor financials,” said Sanjay Chhabria, who heads Radius Developers. With implementation of the Real Estate (Regulation and Development) Act, 2016 “more opportunities are coming our way where we can relaunch projects in a new avatar,” Chhabria said.
“In many cases, prices and home sizes need reduction as per buyer needs in that location,” he said.
Five years into the slowdown, the realty sector is finding it difficult to make a turnaround and handle the challenges. Across the top seven cities, 575,900 residential units, launched before or in 2013, are stuck at various stages, according to Anarock Property Consultants.
The market has improved a tad with Liases Foras Real Estate Rating and Research Pvt. Ltd stating in an August report that overall unsold inventory has narrowed by 7% from 44 months to 41 months during April-June from a year earlier. An efficient market maintains 8-12 months of inventory. An inventory overhang of 41 months shows a downside pressure on price in major cities across India.
The challenges have opened up avenues for companies such as Radius Developers to innovate, revive and liquidate the inventory. A Centrum Group subsidiary, Centrum REMA LLP, too, has positioned itself as an innovator partner for builders. It recently relaunched a residential project, Codename Relive, in suburban Mumbai, that was stuck for more than a year.
As the distribution partner, Centrum made several changes to woo next-gen homebuyers. The project is promoted by Anchor Realty, along with developer Shreenathji Group, according to Centrum REMA’s website.
“There are various situations where specialized firms are needed to bring together sales, design, marketing, branding of a project where a developer either has financial issues or has the money, but can’t sell on his own because the brand does not resonate with customers,” said a person aware of the issue, seeking anonymity.
Some private equity funds, too, have sensed potential in distressed realty assets and have gone beyond their role as investors to participate in designing, pricing, and even appointing contractors.
Kotak Realty Fund has invested ₹100 crore in a commercial office project off Andheri-Kurla Road, Mumbai, where the project was stuck as the developer’s loan became a non-performing asset. Kotak partly paid off the loan and transferred a portion to Phoenix ARC. It completed the project and launched it earlier this month for strata sale.
Kotak has also invested ₹240 crore in an under-construction mall in Chennai, which had huge debts. “There are many such opportunities today and we are exploring them apart from our regular investments,” said Vikas Chimakurthy, director, Kotak Realty Fund.