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Scarcity Paves Way To Innovation

Scarcity of commercial land, particularly in the metros and larger cities, is making retail biggies work out innovative strategies. Subsidiary companies of retail majors, such as Mukesh Ambani?s Reliance Property, Kishore Biyani?s real estate fund Kshitij, Sunil Mittal?s Bharti Realty and Ashok Piramal group?s Peninsula Realty Fund, are all in talks with various real estate companies to jointly develop retail spaces on the developers? existing land.

Mostly, the model being explored is that of the retailer floating a special purpose vehicle (SPV) in a JV with the real estate partner for developing malls. The contribution of the real estate partner lies in bringing land for the project, which is then valued and equity sharing is worked accordingly. Once the project is functional, the concerned retailer would retain major part of the mall, and lease out the rest to other brands. This would save these companies, a lot of time and efforts, otherwise required in the process of land identification and acquisition.

Recently, Kshitij Investment Advisory did a similar project in Hyderabad in a JV with south-based real estate firm Salapurias. ?We are looking at similar SPVs with real estate firms for all our properties,? says Kshitij Investment head Shishir Baijal. The Ashok Piramal group has floated Peninsula Realty Fund (PRF), mainly with the aim of taking their share in commercial developments in larger cities. ?Based on their investment in commercial projects, the company can command prime retail space for its Piramyd stores,? said a source in the retail property brokerage business. ?As far as PRF is concerned, we will invest in all viable real estate projects, commercial as well as residential. For this, we keep exploring various models,? says Rajeev Piramal, executive vice-chairman, Peninsula Land.

However, things are not all that simple, as retailers are making an attempt to share the realtors? land pie. ?I have been approached by certain firms. But we are not interested in any partnership where we have to share our land. We are willing to partner with companies who bring land along with them,? says Unitech MD Sanjay Chandra.

According to brokerage firms, trying to fix up deals between retail and real estate companies, the JV strategy would work better for smaller realtors. ?There are many real estate firms in Delhi and Mumbai, which have significant land banks in good locations, but don?t have capital. Tying up with a big retailer becomes a win-win situation for both the partners,? says Delhi-based brokerage firm Realty Verticals? director Rajan Ahuja.

MOn the other hand, real estate companies say that the involvement of a retailer in the development of a mall from the early stages, leads to a better conceptualisation of the property. Source : The Economic Times , Mayur Shekhar Jha, New Delhi << Back