Mumbai-based privately held real estate player House of Hiranandani, is coming out with a different strategy – acquiring distressed projects of developers – to expand its portfolio.
The company has its presence in Chennai, Bangalore and Hyderabad apart from Mumbai. The attempt to test the inorganic expansion strategy is aimed at capitalizing its cash-rich position.
The normal practice is to buy a land parcel in collaboration with a private equity fund or sign a joint venture with a developer on a revenue sharing model. But the new methodology is about looking at opportunities where projects have commenced and have been stalled due to lack of funding expertise.
The benefit has to do with land acquisition process – that is already taken care of and what the company brings to the table working capital without over leveraging themselves.
This strategy will be applied in Mumbai, Bangalore and Pune. Mumbai is the top market in terms of value of transactions and Delhi NCR by volume. Other markets have sustained only due to end user demand for reasonably priced projects. Developers have not launched projects in several quarters due to cash flow crunch.