Piramal re-enters realty for growth
Jan 24 2011 , Mumbai
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.”