Land Deals Struck At Lower Rates Due To Lower Residential Demand

Barring a few prime locations in Mumbai and Delhi, land transactions have slowed in the last few years and prices have stagnated or fallen countrywide.

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Land Deals Struck At Lower Rates Due To Lower Residential Demand

Land deals are being struck at rates lower than or the same as five years ago, brokers, builders and real estate consultants said, as lower residential demand from end consumers and high leverage among developers ease pressure on land. There are few takers for large plots and developers are mostly opting for joint developments with landowners.

Barring a few prime locations in Mumbai and Delhi, land transactions have slowed in the last few years and prices have stagnated or fallen countrywide.

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When we are buying land, we are constantly negotiating downward. With the slow pick-up in residential demand in the last three years, landowners who want to sell land are smart enough to drop (prices) by 5-10% particularly in the suburbs of Mumbai, said Chief executive officer (CEO), Shapoorji Pallonji Real Estate.

The Mumbai-based firm has been scouting for land in Mumbai, Pune and Bengaluru for affordable housing projects. In Gurugram, where home sales have significantly dropped, land prices, too, have dropped in the range of 25-50%, he said.

Analysts believe the developer struck a plum deal with a 30-40% discount though it will have to pay various government charges for conversion of industrial land into residential.

Recent land deals in the Mumbai Metropolitan Region (MMR) include Lodha Group buying a five-acre plot for Rs 375 crores at Jogeshwari and Kanakia’s purchase of a seven-acre land at Vikhroli for Rs 36 crores. Runwal group is close to buying 2.7 acres from Rashtriya Metal Industries for Rs 180 crores.

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Land brokers say all these deals are being closed at around 20% lower than the asking price or at the same rate 4-5 years ago.

Apart from a few well-developed plots, prices have clearly not moved up across the country. Even (prices in) some of Delhi’s prime residential colonies are down by 40%, said CEO, DLF Ltd. DLF recently won a prime 12-acre land through an auction for Rs 1,49 crores.

Landowners have become more realistic now and have accepted that land as an asset will not appreciate much in urban areas in the next three-four years as well, said local director and head of land services (West India) at JLL India.

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The increase in development potential of certain areas should effectively lead to an appreciation of the land price, but on a per sq. ft basis, land prices have not moved up and land deals are happening at a discounted rate, said head-corporate strategy and land acquisition, Wadhwa Group.

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