India Inc decides to hold on to land bank

India Inc is realising it’s wiser to hold on to the goose that lays golden eggs, rather than to sell it off, particularly if the price of gold is expected to keep rising. The real estate boom, in the first stage, had a number of industrial companies capitalising on their land assets by selling them out to developers. But now companies are realising there’s more money to be made out of retaining the real estate.

Many companies, including those in sectors such as apparel, jewellery and tobacco, are turning their physical assets into a long-term revenue generator by forming joint ventures with construction companies for development of the property, rather than bringing one-time funds infusion into the balance sheet.

Take jewellery maker Rajesh Exports, for instance. The company, which has 32 properties spread across Bangalore and Kerala, took a board nod early this year for development of these properties. In a statement Rajesh Exports chairman Rajesh Mehta said, “We feel that even though the development may require time, it would be worth it as it would fetch very attractive valuations compared to selling of the land bank.”

He is not alone in taking a contrarian view on the real estate assets. Another such company is cigarette maker GTC. The company which has assets in some prime locations in Mumbai, Hyderabad, Baroda etc, has already initiated moves to develop part of its assets.

Its 2.75 acre land at Hyderabad, for instance, is being developed into a mall which would include a four-screen multiplex. In this property, GTC would own 50% of the built up area of the mall while the entire investment for the development of the property would come from its partner.

Says GTC, chairman, Sanjay Dalmia, “I don’t believe in selling land. We would rather add value by developing it through strategic joint ventures and thereby enhancing shareholder value.” Its the same scene in various other parts of the country.

For instance, in Gurgaon, textile company House of Pearl Fashions recently entered into a 47.5: 52.5 joint venture for a commercial project on a 9-acre plot on the Delhi Jaipur highway with Delhi-based real estate firm Ansal API.