Builders join hands to fight slowdown in indian real estate industry

Monetary problems have motivated many builders to join hands through Joint Ventures and execute projects. This newest trend is Development Management Agreements (DMA) where big builders join hands with other developers with land parcels to raise funds, construct towers and sell apartments.

This has been necessitated as the current land prices have reached exorbitant levels and in the current slowdown scenario where the sales have dipped considerably, purchasing land does not ensure viability of the projects.

Many of the big firms like Godrej Properties, Tata Housing Development Company, Ekta World, Radius Developers, Neptune Group have all joined the bandwagon with remarkable success in their ventures. Radius Developers is one of the leaders who has inked seven DMAs in projects at Hughes Road, Andheri, Goregaon, Santacruz and Chembur.

Sanjay Chhabria, Managing Director, Radius Developers said it makes no sense to invest heavily in land. “Here our liability is less and we concentrate mainly in the execution of the project and sales,” said Chhabria.

Ekta World has inked a deal with Pashmina Developers for a luxury project at Powai. Here while Pashmina holds the land parcel, Ekta World will help the former to raise funds, execute the project as well as sell the houses. According to Ashok Mohnani, Chairman and Managing Director, Ekta World, it is a win-win proposition for both the parties. “We make use of our goodwill to raise funds for the landowners, help in approvals, construction and also in sales. Both make money in the bargain by this synergy,” said Mohnani.

Here, these big companies are paid fee in the range of 10-15% of the total sales generated by the company. Another major advantage of this DMA scheme is that it also helps many builders build their social infrastructure like schools, hospitals and malls speedily with the help of their partners. Many builders who own large tracts of land are also in the process of allowing other builders to take up the construction of these facilities.

Liases Foras, the real estate research firm, said it was time for more such tie ups. “Innovation is the only key as the current slowdown is the worst and builders are all stressed because of it. DMA is an innovative concept and we will see more of these in use in the coming days,” said Pankaj Kapoor, CEO, Liases Foras.

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