Samir Jasuja, CEO of real estate analytics firm PropEquity, said such distress sales have so far involved only non-core assets and land banks. "This has only made minor dents to their outstanding debt. Going forward, as inventories pile up due to lower absorption levels, developers may resort to pricing their projects more competitively,” he said.
Many investors are bleeding from previous investments in commercial real estate and are putting some of these assets on the block at discounted rates. They hope to use the realisations from these sales in under-construction projects where the returns could be better.
Sales of distressed assets are becoming inevitable because banks have tightened lending norms for real estate.
“When a developer has a loss making asset and relatively high debt on his books, there is a tendency to dispose this asset at a discount,” said Avinash Rao, regional director-south at property consultancy Knight Frank India.
Samir Jasuja, CEO of real estate analytics firm PropEquity, said such distress sales have so far involved only non-core assets and land banks. "This has only made minor dents to their outstanding debt. Going forward, as inventories pile up due to lower absorption levels, developers may resort to pricing their projects more competitively,” he said.
Many commercial assets are returning losses because smaller IT companies are on a consolidation drive, while bigger ones are relocating to SEZs to reduce costs and avail tax benefits . “Corporate expansions are likely to decrease due to the uncertainties in the global economic situation. The office space supply is expected to outweigh demand in most prime cities,” said Ashutosh Limaye, head of research at property consultancy Jones Lang LaSalle India.
Fund houses and HNIs are shopping for troubled commercial assets. “We are close to buying a 1 million sft of commercial space in Whitefield for Rs 125 crore. The market value of the property is over Rs 150 crore,” said Sudhakar Gande, director in Jupiter Capital, the investment company owned by Rajeev Chandrasekhar who previously founded BPL Mobile.
Real estate consultancy firm L J Hooker is brokering a hotel property near Majestic theatre on Hospital Road in Bangalore that has been put on sale because the owner is not able to service his loans. The firm is also facilitating the sale of a 40-acre agricultural plot on the Bangalore-Mysore expressway for Rs 15 lakh an acre, whereas the market value is over Rs 20 lakh an acre, said sources privy to the development.
Gaurang Chandarana of Reddfortune Wealth Management, a boutique company focussed on wealth creation through distressed assets, said many HNIs have shown interest in defunct industrial land in places like Pune.
Prashanth Sambargi, partner at property brokerage firm Mars Realty, said HNIs are also buying property auctioned through debt recovery tribunals. Banks and financial institutions auction assets through these tribunals to recover debts. "The problem sometimes is that litigation by aggrieved parties prolongs the possession of the property," he said.
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