The Hindu Business Line : Corporate India milking its real estate

`GET the best out of what you already have' appears to be the new corporate mantra. If nothing, at least the way some of the companies have gone about utilising their existing real estate assets, suggest that. In the last one-year, more than 20 companies, including Bata India, Indian Hume Pipe, Novartis India and Gulf Oil Corporation have either sold their real estate assets or have tried to re-deploy it more productively.

Bata India, for instance, plans to take up a major re-development of Batanagar estate in a surplus area of 264 acres, where its biggest factory in the country is located. The re-development project is being taken up as a joint venture with the real estate developers, Calcutta Metropolitan Group.

Delhi-based Noida Toll Bridge Company, on the other hand, plans to set up a subsidiary and transfer 100 acres of surplus land, located in the Noida and Delhi regions, and development rights to the subsidiary.

In Bangalore, Gulf Oil Corporation has entered into an agreement to sell and develop the land located at Malleswaram through a joint venture with Abhishek Developers. The total proceeds of this deal are expected to be over Rs 65 crore.

Mumbai is not far behind when it comes to such deals. Indian Hume Pipe Company has entered into a development agreement with developers, in respect of its factory land at Wadala, for a total consideration of Rs 39 crore.

Asked to comment on this trend, Mr Sanjay Varma, Joint Managing Director, Cushman & Wakefield, India says, "This trend is not peculiar to India. Globally, companies have done it from time-to-time. Even in India, several companies have done it in the past. The difference is, it is more visible now. At best such activities would constitute 5 to 10 per cent of the total real estate development activity."

When asked what was driving the trend, he said, "If land was purchased in the distant past at historically low prices, developing and selling them yields better returns. Secondly, the demand for property space has also increased because several multinational companies have come into India. Thirdly, businesses are increasingly coming under pressure (on margins). Hence companies are putting their idle real estate assets to good use or sell them."

Confirming this view, a highly placed source in another leading international real estate consulting firm, says, "Strategic business alignment for commercial exploitation is what companies have resorted to these days. Several companies have realised that they are sitting on gold mines. So putting them to best use is what they look forward to."

Interestingly more than any city, Mumbai and its suburbs saw several companies selling their real estate properties. For instance, Texmaco Ltd has sold off its leasehold land at Worli in Mumbai for Rs 21.5 crore to K. Raheja group. Other companies that have sold their lands in and around the city include Cadila Healthcare, Novartis India and Colour Chem. Several companies including Pradeep Metals, Mafatlal Dyes have intended to sell their property without mentioning the amount involved.

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Corporate India milking its real estate