Once scam-tainted, DB Realty’s promoter is at the top of the JV game today
DB Realty had already had a torrid time when the 2G spectrum scandal broke in 2011 and both its promoters were sent to jail. After a seven-year legal battle, both Goenka and Balwa were acquitted due to lack of evidence, but Brand DB Realty had taken a beating. A dozen of its projects were stalled, and financial institutions had turned their back on the company
Mumbai: When Bengaluru-based developer Prestige group purchased a prime 2.3-acre land parcel in Marine Lines for ₹704 crore in July this year, it was the third such piece of land it bought from DB Realty, once a powerful brand known for its connections in the government and projects all over Mumbai. To many, it appeared that the Vinod Goenka and Shahid Balwa-promoted realty brand was losing its stronghold.
DB Realty had already had a torrid time when the 2G spectrum scandal broke in 2011 and both its promoters were sent to jail. After a seven-year legal battle, both Goenka and Balwa were acquitted due to lack of evidence, but Brand DB Realty had taken a beating. A dozen of its projects were stalled, and financial institutions had turned their back on the company.
Seven years on, DB Realty appears to have leveraged its core strengths—powerful connections in the government and a huge land bank at prime locations in Mumbai—to re-emerge from the dark phase in the 16-year-old company’s fortunes.
“We should be close to debt-free by March 2024,” said Vinod Goenka, the 64-year-old chairman and MD of DB Realty. “In 2008-10, DB Realty was the No 1 developer of Mumbai. Then 2G happened, and it took seven years for us to come out of it. But by then, the damage was done.”
Funding had completely dried up and the brand had taken a big hit. “So Shahid and I decided that we had to find a drastic solution,” continued Goenka. “We may not have liked that solution—because it would mean diluting the DB brand—but in my view, we didn’t have a brand in existence anymore. So, we agreed on one aspect—that we still had the finest parcels of land at DB. We had the prettiest bride in the city. We needed to find the right suitors, the right partners who could monetise this for us.”
When they tried to test this strategy, however, they found that nobody wanted to buy the land due to the 2G shadow and fears that they could be attached by the law enforcement agencies. So DB Realty birthed a new model for Mumbai real estate—joint venture development. “Our model was very simple,” said Goenka. “I have the land rights or ownership. I will get all the approvals, you need to fund me for the approvals by way of a deposit, and we will work out a revenue-sharing ratio. Our partner would be responsible for construction, arranging funding and marketing. Our job was to get all the permissions.”
Goenka said their first project was X BKC at Bandra East. “Sanjay Chhabria gave us a deposit of ₹325 crore which went into obtaining approvals,” he said. “We worked out a sharing ratio and the project took off well though Sanjay himself ran into problems of his own later.”
Seven years later, said Goenka, every big developer with the exception of Oberoi Realty—which still buys land—was looking at the JV model. “Because they realised that instead of paying hundreds of crores of rupees to buy land and then make money, they could probably do five projects with that much,” he said.
Goenka explained that as a land owner, a big partner brand like Godrej could sell at a 10 percent higher market value than he could. “I don’t think they are taking anything away from my pocket,” he said. “We are happy that we are getting the best value. Our responsibilities are limited to getting approvals, and handling the title and possession of the land. Thereafter, our core developer continues to sell and give us our share. This model has worked beautifully for us for the last five years.”
Goenka said he had got the best partners such as Prestige—which DB brought into the Mumbai market—Godrej and the Rustomjee Group. DB’s first JV came with Bengaluru developer RMZ Corp for Kamal Amrohi’s Kamalistan film studio in Jogeshwari. However, the company does not insist on co-branding. “We told our partners that we didn’t want co-branding since our brand could hurt them,” said Goenka.
The joint venture model allowed prominent Bengaluru developers entry into a market dominated by big developers like the Lodha Group and Godrej group with market caps above ₹10,000 to 12,000 crore. “Bengaluru and Pune developers have the execution power but they when it comes to getting approvals from the local authorities, no one can beat a local Mumbai developer,” said a senior real estate analyst. “Mumbai does not have a single-window clearance, and developers use their contacts to get approvals. DB Realty has very good relations with local authorities.
“DB Realty needs to be given credit for making these JVs seamless,” continued the analyst. “None of these projects have faced any glitches in execution. After one successful JV like X BKC, they could have easily started developing projects themselves, but they leveraged their liaisoning and followed a monetisation strategy with the right partners, and the strategy has paid dividends. There have been other JVs, but the scale of DB’s JVs is commendable.”
Asked whether DB Realty would construct its own projects after March 2024, Goenka said, “We have cleaned up a lot of our past and now the DB name is again being seen as a reliable name in the industry. We may start insisting on co-branding as the second step. The final step will be to start building ourselves, besides following the JV model. The latter model could be a perpetual one even after we rebuild our brand.”
The realty brand has 600 acres of land in Mumbai MMR, with some projects at various stages. “With the model that we have, our land bank will never be dry,” said Goenka. “The reason is that we have the ability to deal with slum dwellers, tenanted buildings, redevelopment of societies. None of the other big brands have this skill. They don’t want to dirty their hands in slum redevelopment. DB is right on top in that skillset.”
CASE STUDY
The shadow of the 2G scam still looms large when it comes to home buyers, and DB continues to deal with a number of cases filed before MahaRERA. “In 2009, we invested in DB Ozone building which was planned within Mumbai municipal limits, but in 2014, the developer said the building had not got approvals, and therefore they shifted it across the Dahisar check naka to Mira Bhayander,” said home buyer Anita Aranha. “The agreement said we’d get possession in 2017 with a six-month grace period, but even today we have not got possession.”
Aranha filed a case in MahaRERA, seeking interest on delayed possession in 2020. It took a year for the Authority to pass an order in her favour. “However, the developer challenged the order in the Appellate Tribunal, which took another two years but the tribunal also ruled in our favour,” she said. “DB then took us twice to the high court, which rejected its petition three months ago. Now the interest they are supposed to pay us stands at around ₹19 lakh, while our final dues are ₹15 lakh. They have told us that they will adjust the dues against the interest and pay the remaining amount but they are not putting it in writing. We are waiting for them to do that.”