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Builders pre-selling properties as finance gets costly

Builders pre-selling properties as finance gets costly

Apnaloan.com Research Bureau

25 Aug 2007

Real-estate developers are pre-selling their properties to avail of cheaper finance. Peninsula Land sold 5.75 lakh sq ft mill land Dawn Mills for Rs 1,075 crore, to Alok Industries on August 17, according to media reports. Peninsula will build commercial buildings on this land as per Alok Industries' specification.

Orbit Corporation sold its Kalina property for Rs 800 crore to JSW Steel and will construct offices on that land for the steel maker.

In pre-selling, the developer receives upfront payment. This money is used in the construction activity and developers do not need to approach banks for project loans. In many cases, the seller retains a part of the property. As the property value appreciates, the developer constructs on the retained property and enjoys the upside.

HDIL, considered pioneers in pre-selling, pre-sold Bandra-Kurla-Complex, 1.7 million sq ft for over Rs 2,000 crore, the biggest deal by value in the country. HDIL retained 3 lakh sq ft in that property.

Industry experts say that the trend of pre-selling is expected to gain momentum, as it takes care of the hassles such as finding individual buyers and promoting one's office space.

Market sources suggest that upcoming commercial and retail projects may see such deals further. These projects include Indiabulls property in Lower Parel and DLF Mall in Lower Parel and Bombay Dyeing property at Worli.