Why are real estate developers launching plotted developments?

Why are real estate developers launching plotted developments

For developers, plotted development helps liquidate land banks to raise working capital. These projects require minimal capital investment, limited project execution risks and faster exit opportunities.

Thanks largely to upcoming expressways, new land parcels along the stretch have now opened up for real estate development, especially the plotted segment. Of late several branded real estate developers have launched plots as part of gated societies to be built on and moved in. The trend has caught on because, for developers, plotted development is a smart strategy to liquidate land banks for raising working capital. These projects require minimal capital investment, limited project execution risks and faster exit opportunities.

Earlier, plotted developments were generally offered by smaller developers.

“Buyers prefer the asset as it is relatively affordable compared to built-up real estate. The returns are better on a land investment compared to built-up real estate. Proposed infrastructure projects in city peripheries provide a strong rationale for investing in land now and reaping the benefits on their completion,” said Anuj Puri, Chairman, ANAROCK Group.

Rise in price

For developers, plotted development is a smart strategy to liquidate land banks for raising working capital. This asset class is characterised by minimal capital investment, limited project execution risks and faster exit opportunities, he said.

According to a report by ANAROCK Property Consultants, the highest rise of 38 percent in average plot prices was seen along the Yamuna Expressway, the 165-km road along the eastern bank of the Yamuna river that connects Noida and Agra. The average plot prices here rose to Rs 2,200 per square foot (sq ft) by the end of the first half of 2022 from Rs 1,600 per sq ft in 2019. In Greater Noida (West), plot prices climbed 36 percent to Rs 4,500 per sq ft from Rs 3,300 per sq ft. Since the construction of Jewar International Airporthas gathered pace, development activity in and around the area has risen, leading to higher land prices.

Recently, M3M India launched Phase-I of its first plotted-development project ― M3M City of Dreams ― in Sector 37, Panipat, Haryana. In Phase-I, M3M introduced 900 plots, ranging from 140 to 180 square yards (sq yd), valued at Rs 600 crore, out of which 436 plots have already been sold, mopping up Rs 250 crore.

Bengaluru-based Vaishnavi Group also plans to bring to the market 62-acre land in eastern Bengaluru’s Sarjapura. About 30 acres will be for plotted development while the rest will be villas. The villas, sprawled over about 4,000 sq ft, will start from Rs 11,000 per sq ft for about Rs 3.4 crore and upwards. The company has also identified another 30-acre land parcel about two km from the project for plotted development.

Purva Land by Puravankara Ltd has launched Purva Oakshire in Bengaluru on 35 acres of land. The plot sizes vary from 1,000 sq ft to 4,500 sq ft and the price starts from Rs 81 lakh.

The House of Abhinandan Lodha has launched plotted development on 20 acres in Alibaug. The plot sizes range from 2,000 sq ft all the way up to 5,000 sq ft. The expected launch price for this product to be launched on June 13 is more than Rs 2 crore.

Ritesh Mehta, Senior Director and Head, West and North, Residential Services & Developer Initiatives, JLL, agrees that this asset class is popular because it offers faster price growth to investors and quick exit to developers. “It comes with minimum project execution risks and fewer approvals. It offers faster exit compared to multi-storey housing and 2X returns to the builder,” he said.

It also offers flexibility to buyers to buy land in any part of the country, he added.

Plots being encashed by listed developers in Tier 2 cities

Real estate experts point out that post COVID-19, launching plots was a strategy adopted by developers to get quick liquidity at a time when the market was still reviving. Today, prices in city centres have risen and therefore, developers prefer launching high rises within the cities as group housing is far more financially remunerative compared to plots.

“Launching plots after the pandemic was a risk-averse strategy when the market was reviving. This opportunity is now spreading to Tier 2 and Tier 3 towns. Some listed players have started scouting for land in Sonepat, Karnal, and the Tricity area in Punjab, where they plan to launch plots,” said Mudassir Zaidi of Knight Frank, Executive Director – North, Knight Frank India.

Source : Money Control

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