Companies Cashing In On Land Banks To Raise Funds - QuBREX ...

By:?Shilpa Phadnis, ?Publish: 8-July-2011

High cost of capital and historically high land values even in a depressed market are persuading corporates and public sector units to monetise land parcels sitting on their balance sheets for record valuations.? Companies like Raymond, Bayer, Mafatlal Industries, Rail Land Development Authority (RLDA) and?National Textile Corporation?(?NTC) are liquidating their non-core assets despite weak sentiments prevailing in the market.? This is true of?Mumbai?where sales volumes continue to be muted and prices have remained flat for over the last six months. "Though the prevailing mood in the market has dampened valuations, companies are selling land parcels to raise money. The cost of capital is so high that it has forced companies to explore new ways to service their debt and other commitments," said Amit Goenka, national director - capital transactions at real estate consultancy Knight Frank India.? Textile major?Raymond?is planning to sell 125 acres in Thane for Rs 2,000 crore, according to sources in the real estate industry. A clutch of realtors including Sheth, Lodha, Oberoi and Sunteck are front-runners for this plot. Companies are monetising land in industrial belts to get better returns given the historic land values. "Some companies see more value in selling the land parcel than in running factories. The upsides from land sale is still at a premium ," said Ambar Maheshwari, MD - corporate finance at real estate consultancy, Jones Lang LaSalle?India?(JLL). Also, many factories reeling under labour crunch are finding it difficult to manage day-to-day operations.? Chemical and pharma major?Bayer?sold 108 acres in Thane for $300 million this year. As an indicator, the total acquisition and development cost, which includes the cost of the land and an average cost of constructing grade A office space could be $130 per sft, according to?JLL?estimates.Mafatlal Industries?,?Parsvnath Developers?and?HDIL?were others divesting their real estate portfolio.? Companies in?Bangalore?are also looking at selling prime land parcels.?Siemens?was keen on selling 8 acres in Koramangala , a high-end suburb, some time ago. But realty sources say the deal hasn't gone through yet. Gokaldas Images has 25 acres in Devanahalli and?Gulf Oil Corporation?has 40 acres in Yelahanka, both on the outskirts of the city. Sources say they are evaluating selling some off their land parcels.? PSUs sitting on factory land want to liquidate their surplus real estate assets. Railway Land Development Authority (RLDA), a statutory body under the ministry of railways, has invited bids to auction railway land worth Rs 3,500 crore in Bandra (E). Majority of the proceeds will be used to develop phase II of the Mumbai Urban Transport Project.? Parsvnath Developers has won the bid to redevelop existing railway colony in Sarai Rohilla in?Delhion a 90-year lease term. Of the total land area of 15.37 hectares, 4.37 hectares will go for the redevelopment of railway colony. "As part of the project, Parsvnath is building 750 quarters for our staff. We have leased the land for Rs 1,651 crore. We are looking at divesting some land in Chennai and Jamnagar," said Rajesh Aggarwal , GM-project development , RLDA.?

Source: http://qubrex.posterous.com/companies-cashing-in-on-land-banks-to-raise-f

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