Sunteck Realty Ltd. was the first to spot a business opportunity ten years ago, when she grabbed land in Mumbai’s future financial district and built homes for wealthy bankers. Now, in the wake of a protracted financial crisis and the pandemic, a good deal is brewing again.
According to the homebuilder, the land sells for 20-30% discounts in India’s most expensive real estate market. It acquired around 9 million square feet last year and is in talks to purchase more in 2021.
“Good deals have been available during the pandemic; we made three major acquisitions which were among the most important of the past seven years, ”President Kamal Khetan said in a telephone interview. “The landowners are desperate now, they are suing the developers. It’s a buyer’s market.
Sunteck avoided buying land at the start of the previous decade, after selling houses in the Bandra Kurla complex to individuals including former Citigroup chief Vikram Pandit and Indian billionaire Uday Kotak. A few years earlier, the area was a low-lying parcel prone to flooding from the adjacent Mithi River; today, it houses the Indian headquarters of banks including Citi, as well as the US consulate and several five-star hotels.
The rapid development of Mumbai – like BKC – has fueled prices with easy access to liquidity from shadow lenders. In recent years, however, these financiers have been in crisis and the pandemic has worsened the blow to the real estate market, offering a consolidation opportunity to companies with low debt, strong cash flows and a proven track record of carrying out projects.
Sunteck has a total land reserve of approximately 40 million square feet, of which approximately 80% is developed through joint ventures or joint development agreements. In the latter case, the builder shares part of the income with the landowner instead of buying the land en bloc. On average, Sunteck shares 25% of turnover.
“If there is an attractive distress sale, we can buy and invest capital,” Khetan said. “However, at the moment there are many opportunities available in the asset-light model.”
He added that the discounts would likely trickle down to buyers. Sunteck intends to finance its land acquisitions through internal regularizations. Reservations rose 6% to 3.7 billion rupees ($ 50.2 million) in January-March, giving it its highest ever collection of 7.8 billion rupees during the fiscal year ended in March.
“We have consolidated our presence in the Mumbai region,” Khetan said. “We are now looking to grow exponentially, we are seeing three times the growth over the next 3-4 years. “