DLF Ltd, the country’s largest property developer, sold a 17-acre land parcel in the Worli area of Mumbai to the Lodha Group for Rs 2,727 crore by making returns four times its initial investment of Rs 702 crore in 2005.
DLF has liabilities of Rs 1,500 crore on the land parcel which Lodha will take over as part of the deal and pay Rs 1,227 crore to buy DLF’s unit which owns the land.
“I think we have paid one-third or one-fourth of deals which have happened in the area in the last couple of years,” Abhisheck Lodha, managing director of the Lodha Group, said
|LARGEST LAND DEALS
||Value (Rs cr)
With five million square feet of saleable area, the deal value works out to be Rs 5,500 per sq ft, Lodha said. Property prices in the area hover around Rs 30,000 per sq ft.
In 2010, Indiabulls had paid Rs 1,979 crore for buying Bharat Mills and Poddar Mills from National Textile Corp (NTC). According to property consultant, Indiabulls has got a floor space index of one million sq ft and paid around Rs 20,000 per square feet. However, analysts said the per square feet rate looks lower given that the plot has parking floor space index (FSI) concession which allows buyers to build more than the normal FSI. FSI means the permissible construction allowed on a given plot of land.
According to a statement by Lodha group, it has piped Oberoi Realty and Runwal, who were in the fray to buy the land from DLF.
“I think it is a reasonable deal and rightly priced considering the huge parking element in it. You should understand it is one of the largest transactions, given the current state of market. Not many players have that kind of a liquidity in the current conditions,” said Ambar Maheshwari, managing director, corporate finance, Jones Lang LaSalle.
Lodha plans to pay the money to internal accruals and private equity funding. Lodha said the PE part would be restricted to Rs 500 crore.
Lodha has already paid Rs 500 crore for the deal and needs to pay the rest in the next three months.
“In these tough real estate environment, we have optimism in Indian economy, strength of Indian economy and our company to executive project of this scale,” Lodha said.
DLF executives said they were happy with the deal. “We are pleased with the transaction. There is a price discovery in large deals and whatever best price you find, you go ahead,” said Sriram Khattar, senior executive director, DLF.
Lodha said the project of this scale would take around five to seven years to execute.
“The location is good, and connectivity is also good. We have bought a live project which has all approvals in place,” he said.
Another executive with DLF said the company had effectively reduced its debt by Rs 2,700 crore. It planned to raise Rs 5,000 crore from sale of Mumbai land, wind energy business and the Aman Resorts hotel chain this financial year. The company has a debt of Rs 23,000 crore.
Lodha has been buying land for the last couple of years. Recently, the developer has bought a land parcel in South Mumbai for Rs 600 crore. Before that, it bought Washington House from American Consulate for Rs 375 crore.