India Inc gears up to enter the realty market
By siliconindia   |   Tuesday, 02 January 2007, 18:30 IST
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Mumbai:With high demand and a limited supply causing tremendous increase in returns from Indian real estate, corporates are entering the fray of what many view as a major asset class for tomorrow. Many large and mid-sized Indian companies are currently mulling inclusion of real estate as part of their core activity to realize returns of 30 percent to 35 percent that this market has generated in recent times, reported The Economic Times. According to industry sources accessed by the publication, various companies have resorted to amending their memorandum of association to include real estate as a principal activity. Acquisition of large stakes in unlisted small companies with interests in real estate has been another method to include this sector, specified the sources. Vardhman Industries is one of the companies that have taken the first route. It recently amended its memorandum of association by including a clause to “decide in future to diversify into real estate business”. The proposal has now been put for shareholders’ clearance through a special resolution through postal ballot. “What all this means essentially is that companies are trying to realize the true potential of their land holdings, especially in cases where the value of their business is much less than their real estate assets,” says Ritesh Vora, director investments at Saffron Asset Advisors, which has invested about $27 million in Indian realty projects, out of the $230 million it has raised through two real estate India dedicated funds. On the other hand Gulf Oil, part of the Hinduja group, has publicly announced its intention to enter real estate. MD Subhas Pramanik said that the company is set to unlock the potential of the sector’s assets. Among other companies that have recently indicated their interest in real estate development are BK Birla group’s Century Textiles, BF Utilities, Hyderabad Industries, Shree Pre-Coated Steel. Century Textiles has in fact, shifted its textile operations in Mumbai to Gujarat, with the intention of developing the sprawling 30-acre land for retail activities. This, since BK Birla’s grandson and chairman of the Aditya Vikram Birla group, Kumar Mangalam Birla has made known his intention to enter the retail sector. Mumbai-based brokerage SSKI Securities expects a total demand of 160.5 million sqft. for commercial real estate by 2010 by the IT and ITeS sectors alone.

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