Six months after selling off the domestic generic pharmaceutical business of Piramal healthcare in a multi-billion dollar deal, Ajay Piramal, chairman, Piramal En­terprises group has embark­ed on a major foray into real estate by setting up a wholly owned firm Piramal Realty.

This marks the full-fled­ged re-entry of the takeover tycoon into the real estate business. Ajay Piramal ran Peninsula Land the real est­ate developer that’s now lis­ted on BSE, before it was pa­ssed on to the Ashok Piram­al group at the time of divis­ion of the family’s asse­ts. He built Mumbai’s first mall Cr­ossroads at Haji Ali in Mumbai and was one of the early realtors who identified Lower Parel in central Mumbai as a prominent upcoming area for development.

Ajay Piramal, chairman Piramal group confirmed the setting up of Piramal Realty as a wholly owned su­bsidiary of the group. “We’ll decide the investments to be made in this business now. The firm is owned by me personally and is not a subs­idiary of Piramal Healthca­re,” said Piramal. Top Piramal group officials said that Khushru B Jijina who was performing the role of group chief financial officer has been appointed as CEO at Piramal Realty. Jijina declin­ed to comment saying it was too early to reveal plans. Another senior Piramal group functionary Pushkraj Shen­ai has been appointed COO of Piramal Realty.

“We don’t see any issue with Ajay Piramal getting into the real estate business as several players can coexist in this business. Also the brands we use in the realty business are different so we see no conflict,” Mahesh S Gupta, group MD, Ashok Piramal Management Corporation said.

Industry officials aver th­at the company has already begun the process of aggregating land parcels and may have acquired sufficient ar­ea to build several million square feet of space.

“Lot of industrialists are today looking at unlocking the value of their landed assets. This can be done in th­ree ways. First, sell off the excess land or second, enter into a joint venture (JV) with the developer or if you have the resources, develop the property yourself by engagi­ng professionals with the ri­ght experience,” said Pran­ay Vakil, chairman at Knight Frank (India). “We are the beginning of the real estate boom in India. Good entrep­reneurs who understand how to build teams, have go­od governance, can think through execution and fina­ncing can build a massive business worth billions of dollars. People with good ex­perience in building busine­sses in other industries can do well,” said Prakash Kalo­thia, CEO and MD at SUN-Apollo Real Estate Advisors.

Jai Mavani executive director at PwC India said la­nd aggregation is one of the biggest requirements to successfully enter this business and the Piramals have been one of the biggest land aggregators in India, espec­ially in Mum­bai. “Piramal has the holdi­ng power, the financial muscle to ride cycles and understand the realty business too,” said Mavani. “India and China are demand driven markets that are not yet mature. Residential sector is a significant component of both markets and one in which there is a demand supply gap, which can accommod­ate new players. Also this market is characterised by people trying to discover the most efficient way to deliver projects as execution is the key deficiency due to the la­ck of manag­ement bandwi­dth and world class constr­uction firms in adequate numbers,” said Sanjay Verma, CEO Asia Pacific Cushman & Wakefield.

In 2007 Piramals enter­ed into a 50:50 JV with Sunteck Realty called Piramal Sunteck Realty, which has an aggregate of 20 million sq ft of potential area under development. The JV focuses on high-end realty projects in sought after locations in select metros in India and across the globe. It is curre­ntly focusing on Mumbai where it’s developing a nu­mber of projects in addition to Jaipur and Nagpur. In th­ree residential projects in Mumbai’s BKC, the JV has sold stock worth Rs 1,000 crore, accor­ding to officials.

In Mumbai apart from the super luxury ‘Signature Island’ in BKC, a large slum rehabilitation scheme in Ghatkopar, and a 25-30 acre plot in Oshiwara, a one-lakh sq ft plot in Kalina are being planned. A premium resid­ential tow­nship on an eight acre plot in Mulund is also being pl­anned.

A Sunteck Realty spoke­sperson said in Jaipur an 80 acres town ship and in Goregaon a six acres plot was also proposed to be developed by Piramal Sunteck Realty. Ac­cording to the Sunteck spo­kesperson the JV has already launched Signia Isles and the Signia Pearl premium residential projects, in BKC, Mumbai. “The Signature Is­land project aims to sell ar­ound 96 duplexes each bet­ween 7,000-10,000 sq ft in size for between Rs 25-40 crore each,” said the Sunte­ck Realty spokesperson.

The JV was also a succ­essful bidder for a recent a 91,000 sq mt plot auctioned by the City Industrial Development Corporation in Maharashtra. Piramal Sunteck has also purchased 8,230 sq mt plot in Airoli in Navi Mumbai for Rs 75 crore on which it expects to develop a high end residential project. S Sriniwasan, CEO, Kotak Realty Fund that holds an effective 10 per cent stake in Sunteck Realty said “The Piramal Sunteck JV’s are at the project level and largely concentrated in Mumbai by value. Sixty per cent of these projects in the JV have already been sold. Sunteck on its own, too has created additional land parcels. Our feeling is that in real estate unless you operate in the same micro market there’s no conflict of interest. Anybody with equity resources in this business has a good future and if you know the business its even better so in a sense Piramal has the elements to be successful in this business.”

yassirapitalwalla

@mydigitalfc.com