Developers cool to record deal, stay cautious | business | Hindustan Times
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Developers cool to record deal, stay cautious

business Updated: Jun 04, 2010 21:53 IST
land deal

The country’s biggest land deal — Rs 4,000 crore for a parcel of land in Mumbai — last week is not going to be the trendsetter for the realty industry that’s still groggy after the 2009 slump, builders and analysts say.

“The deal is fairly valued and we have sufficient cashflows to make initial payments,” said Abhisheck Lodha, managing director, Mumbai-based Lodha Group, which has five years to settle the payment and has plans for an IPO.

But in a country where developers are still reeling under the excesses of the property boom of 2004-07, there is no hurry to emulate Lodha as demand for residential property shrinks in Mumbai after prices touched an all-time high.

“It’s madness again,” said Pranay Vakil, chairman of the India unit of international property consultancy, Knight Frank, referring to Lodha’s record purchase. “This definitely means property firms are turning optimistic, as similar land auctions last year fetched no bidder.”

Vakil said aggressive bids are not good for companies as high prices have hit sales volumes in land-scarce Mumbai.

Volumes have dropped by about 10 per cent since November but this may not impact prices, Abhisheck Lodha said.

Home prices have reached a new peak in most of Mumbai’s suburbs, while they are close to their previous peaks in the plush south Mumbai localities, Kunal Lakhan, an analyst with Mumbai brokerage K.R. Choksey, said.

The record deal is not triggering a rash of land buying by developers like in 2007.

DLF said it wasn’t looking at buying land, unless there was some ‘boutique’ property.

“We are not buying land, but focusing just on execution (of existing projects),” said Rajeev Talwar, group executive director, DLF.

“People have learnt their lessons. They can’t get irrational now,” said R. Nagaraju, vice-president, corporate planning at Unitech.