Real estate companies are again diversifying into businesses such as aerospace, education, power, film production and healthcare as the industry passes through uncertain times.

In 2006-07, promoters of DB Realty Ltd and Unitech Ltd ventured into telecom. DLF Ltd and Emaar MGF Land Ltd looked at hospitality to diversify their portfolios and others looked at sectors such as logistics, education and oil and gas, but many had to shelve their plans because of the economic slowdown in 2008-09.

This time, their ventures are largely to hedge risk with a diversified portfolio and to dabble in sectors that have higher returns, property analysts said.

"Even those who can diversify into residential, commercial and retail properties are more likely to prevail if there is a setback, because diversification ensures business stability if there is a slowdown in any one sector," said Anuj Puri, chairman and country head, Jones Lang LaSalle India (JLL), a property advisory. "A diversified portfolio also adds credibility to the brand image and boosts investor confidence."

Some of the earlier diversifications by realty firms have gone horribly wrong. In recent months, top executives of Unitech have been questioned in connection with the investigations into the second-generation (2G) spectrum scam. DB Realty's former managing director Shahid Balwa has been arrested as part of the probe.

Diversifications have become attractive again because of slowing property sales and a temporary freeze in liquidity after banks became more cautious with loans to the sector because of the loans-for-bribe scam in November.
If telecom ruled the interest of some developers in the past, the coming years will see huge interest in the education and power sectors, said Ambar Maheshwari, head of investment advisory at DTZ International Property Advisors Pvt. Ltd.

Ajmera Realty and Infrastructure Ltd is venturing into the solar and wind power business. "Negotiations are going on and we are forming a separate subsidiary," said director Bandish Ajmera.

Realty and infrastructure firms would easily cough up nearly Rs.5,000 crore in the education sector in the next few years, analysts estimate.

"The fundamental asset in education is land and it's convenient for them to venture into it. There is also huge demand for education and (it) is a good business opportunity," said Maheshwari.

Bangalore-based Nitesh Estates Ltd recently launched its maiden retail venture and is looking at education. Executive director L.S. Vaidyanathan explained that sectors such as education add value to the brand. "In the process, you also make money," he said.

Another Bangalore firm Salarpuria Sattva Group has three new businesses up its sleeve--power, education and aerospace.

It has acquired Bangalore-based aerospace companies Aero Accessories and Systems Pvt. Ltd (AASPL) and VXL eTech India, and expects combined annual revenues of about Rs.100 crore from these over the next few years.

With a projected investment of about Rs.100 crore by 2012, it plans to open four schools. In power, Salarpuria is applying for licences for solar power projects in Gujarat, Orissa and Rajasthan.

"We will fund these new ventures through internal accruals and debt," said chairman and managing director Bijay Agarwal.

"Businesses such as education, hospitality or even healthcare are tax-saving instruments, allow additional construction incentives and generate huge returns," said Gulam Zia, national director, research and advisory services, Knight Frank India, a property advisory.

Noida-based Amrapali Group has formed a film production company, Amrapali Media Vision Pvt. Ltd, with a seed capital of Rs.100 crore, said chairman and managing director Anil Sharma, refusing to give more details.

It has produced a Hindi movie titled My Dear Friend Hitler.

Spurred by the demand for more luxury and budget hotel rooms, midsize property firms are venturing into hospitality.

Aerens Gold Souk International Ltd (AGIL) has struck a strategic alliance with US-based Wyndham Hotels and Resorts. Announcing the signing of a franchise agreement this week, Ashish Gupta, vice-chairman and joint managing director of AGIL, said the group will build four hotels in India under the "Ramada" brand.

"The group also plans to set up a hotel management academy in collaboration with foreign institutes," Gupta said.

AGIL has acquired land for these projects and is likely to invest Rs.500 crore in them, including land costs.

"We have big plans to enter into education and are in the process of acquiring a big university in Himachal Pradesh," said S.P.S. Pruthi, chairman of AGIL.

Hiranandani Constructions Pvt. Ltd, which ventured into power last year, sees hospitality as a soft part of its business, having opened a 160-room hotel in Mumbai recently.

"We will develop hotels, as part of our townships that are ready and complete," said managing director Niranjan Hiranandani, adding that he sees an incremental rather than exponential growth.

JLL India's Puri said strategic diversification is not within everyone's means.

"Smaller players that have attempted to diversify in the past have met with failure and were obliged to sell out their portfolios to larger banners," he said, without naming them.


Source: Live Mint



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Realty Firms r pretty aware of the things coming in the future . They r aware of the current slow down ( however hard, they may try to rubbish this ) & the squeeze in the current liquidity position . They r also aware that once a Regulator in RE steps in, things would become real hard for them & they would no longer be in a position to loot people & commit all kind of frauds . Hence, most of them r looking to diversify, before things really turn from bad to worse for them .
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  • Originally Posted by MANOJa
    .

    "Even those who can diversify into residential, commercial and retail properties are more likely to prevail if there is a setback, because diversification ensures business stability if there is a slowdown in any one sector," said Anuj Puri, chairman and country head, Jones Lang LaSalle India (JLL), a property advisory. "A diversified portfolio also adds credibility to the brand image and boosts investor confidence."


    I have always been a supporter of the theory to diversify your investments even if you feel that property is the way to go , diversify into residential , commercial and or retail if one has the budget . Its not wise to put all your eggs in one basket !!! Instead of people booking 2-3 residential props as investment , its better to diversify into residential,commercial , retail . ( But please please please avoid I.T. spaces)
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  • Yes, diversifying is always a good strategy, but the way Commercials were down, investing in them, did not have much sense . Now, they r supposed to be recovering ( that is what, i am reading ) .

    I think, if one is investing in say, residential, he should diversify his portfolio by investing in different cities, instead of diversifying into residential , commercial and or retail .

    My PoV, could be wrong here .
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  • Property builders explore overseas real estate prospects

    India’s property companies are exploring opportunities in neighbouring nations including Sri Lanka and Bangladesh as the governments, seeking to boost economic growth, are providing incentives to develop infrastructure.

    The property developers are taking up new projects outside India again after the global financial crisis that started in 2008 disrupted the projects that local developers announced in places such as Dubai, Bahrain and Malaysia.

    “While many developers are evincing interest, they are looking at less capital-intensive projects, eyeing partnerships with local realty firms or strategic alliances with local governments, instead of investing heavily on land buys,” said Ashutosh Limaye, associate director, strategic consulting, Jones Lang LaSalle, a property advisory.

    Bangalore-based builder Puravankara Projects Ltd has renewed interest in Sri Lanka’s capital city of Colombo, after the nation’s civil war ended and the government invited real estate investments into the country.

    Puravankara’s budget housing unit Provident Housing Ltd is scouting for suitable land parcels in the island nation. The company has also changed its plans for its proposed villa project with a mixed-development project on a 25-acre plot that will include commercial as well as residential buildings.

    “We are pursuing Sri Lanka as part of our growth story and there is political will to provide the right infrastructure and incentives,” chief executive Jackbastian Nazareth said. “We have a long-term strategy and we will look at multiple projects with the right product mix as the country is seeing a boost in housing, hospitality and IT development.”

    Limaye said most developers are beginning with a project or two to get a feel of the market and then formulating a larger, long-term business plan.

    Tata Housing Development Co. Ltd is building a large housing project in Maldives in partnership with the government.

    “The project is in the planning stage. Once it is built, Tata Housing will hand over a portion back to the government,” a person familiar with the development said, requesting anonymity.

    The company is also looking at Sri Lanka as a potential market. A Tata Housing spokesman didn’t respond to an email seeking comment.

    Another Tata company, Tata Realty and Infrastructure Ltd, is expected to partner with Maharashtra Housing and Area Development Authority for building affordable homes in Sri Lanka.

    “The project is awaiting a green signal from the Maharashtra government,” said a Mhada official, who declined to be identified because he is not authorized to speak to the media.

    “There is also interest in Bangladesh, which is seeing a housing boom of sorts, and Nepal,” said Limaye.

    Officials of a real estate firm with projects in Kolkata visited Dhaka twice and are looking at housing projects there.

    “We are keen to do housing projects there as there is big demand, but there are issues regarding getting clear land titles, which we are sorting out,” said a company official, who spoke on condition that neither he nor his company be named as the talks are at a preliminary stage.

    The initial euphoria about West Asia, predominantly in markets such as Dubai and Bahrain, hurt many developers back home with the financial slowdown bringing real estate activity to a halt.

    Hiranandani Developers Pvt. Ltd, which started 23 Marina, a residential project in Dubai in 2006, is yet to be completed. The project has seen a slowdown in sales, fall in prices and delays as the city went through an economic turmoil. Chairman Niranjan Hiranandani said the project is slated to finish in the next four-six months.

    Ajmera Group and Mayfair Housing (P) Ltd’s project in Bahrain, HBS Realtors Ltd’s luxury housing plans in Dubai and the withdrawal of Omaxe Ltd from Dubai are among ventures that failed to take off.

    HBS managing director Sandeep Shah said the project fate was “a blessing in disguise”.

    Sunil Mantri chairman of the eponymous Sunil Mantri Realty Ltd said it has put its maiden overseas venture in Malaysia on hold.

    In 2008, Mantri had announced a $100 million investment to develop, construct and market a cyberport (similar to an information technology special economic zone) in Johor, Malaysia, in a joint venture with the Malaysian government.


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