Sharad Mittal, CEO of Motilal Oswal real estate Fund said that, large entity-level consolidations are very difficult to happen and believe there’ll be consolidation at the project level. India Bull’s real estate (IBREL) and Embassy Group have announced their merger terms, in early signs of consolidation within the real estate sector. The deal could trigger a spate of such consolidating efforts within the sector.
The sector, bruised over the last three-four years, has largely stabilized at the project level, where some ventures of a weak or debt-ridden developer are acquired by a large developer. With the path of Covid-19 is still uncertain, industry watchers now see consolidation are broad-based and more deals are getting stuck, even among the highest developers.
Anuj Puri, chairman of Anarock Property Consultants, said the developers were looking to strengthen their positions and weren’t viewing the deals as a way of an outsized developer bailing out a weaker one. “If the pandemic continues, there will be more consolidations within the works,” Puri said.
In the highest consolidation in the real estate sector between two Tier-I developers, IBREL and Embassy announced on Tuesday that they had entered definitive merger documentation to amalgamate continues, finished and planned residential and commercial projects. The combined entity, IBREL, would become one of India’s leading land development platforms, with 80.8 million square feet of launched and planned development potential.
Sanjay Dutt, MD, and CEO of Tata Realty talk that deal was good news for the sector. Thus far consolidation was within the sort of large developers acquiring smaller ones, he said, adding, Tier-I consolidation was even better. He said that it just estimated the unnecessary excessive competition, high speculations and it will make the sector more structured and organized. And he also included that organized players are taking control
Dutt said the deal showed a positive image of foreign institutional investors towards India. According to analysts, the merged entity will be the development arm for both commercial and residential assets. The main target of the sector is developing highly on the commercial asset and to complete and leased, to be transferred to the Embassy REIT platform. Once the merger is complete combined entity will have a debt of Rs 3,700 crore.
