Developers put foreign projects on hold amid crisis at home

Indian developers had entered the Dubai realty market after the 2008 financial crisis, but are now putting their plans on hold.

BENGALURU: An apartment overlooking London’s Hyde Park. A house by the marina in Dubai. A villa in Colombo.

Indian developers who chased these luxury projects in foreign locales in the go-go years of real estate are exiting them or putting their plans on hold, as they focus on the home market that’s in the throes of a liquidity crunch.

Indian property firms had explored opportunities in neighbouring nations including Sri Lanka, Bangladesh and Nepal in the last decade as their governments, seeking to boost economic growth, provided incentives to develop infrastructure. Developers returned to Dubai after the 2008 financial crisis, and London was picked by top Mumbai developers to explore the high-end residential market.

All that has changed now.

Mumbai’s Hiranandani Group had won acclaim for building the 23 Marina residential tower in Dubai. Niranjan Hiranandani, managing director of Mumbai-based Hiranandani Communities, said though they have had another land parcel in Dubai, they have to take a call on when to pursue the project.

“It’s a question of opportunity. When my son Darshan took up 23 Marina, the Dubai market was booming, before the financial crisis. Subsequently, India offered more growth and investment potential vis-a-vis these overseas markets,” said Hiranandani.

Tata Housing Development Co. Ltd, which has projects underway in the Maldives and Colombo, will not take up new projects overseas once these are complete.

Tata Housing managing director and CEO Sanjay Dutt said that as a strategy, new investments will be in markets where demand dynamics are strong. “Wherever there are pre-commitments overseas or in India, we will finish them but the focus is to look at a few strong markets or cities in India,” Dutt said.

Similarly, Puravankara Ltd has had a land parcel in Colombo for over a decade now, but has no plan to launch it anytime soon.

The dynamics of real estate development have undergone a sharp change in the country in recent years, propelled by the ongoing slowdown in the sector and regulatory changes like the real estate regulatory authority. Developers have refrained from arbitrary land buying, acquired some financial discipline and are trying to find their way of the crisis.

In the last six months, Indiabulls Real Estate Ltd (IBREL) and Lodha Developers Ltd decided to exit the London market, where they had planned multi-million-pound prime projects. While Lodha’s exit from its under-construction London projects—1 Grosvenor House and Lincoln Square—was aimed at paring debt ahead of a proposed initial public offering, IBREL said it would sell its Hanover Square property to its promoter for £200 million.

“Other than the glamour factor, these overseas plans were always questionable. Real estate is such a localized business that developers don’t want to venture into newer cities within the country. Growth or diversification don’t demand going overseas, and increasingly we are seeing property firms focusing on a fewer cities,” said Gulam Zia, executive director at property advisory Knight Frank India.

A couple of developers who are still pursuing projects overseas are mainly relying on less capital-intensive projects, through partnerships with local realty firms instead of investing heavily on land buys.

Dhaval Ajmera, director, Ajmera Realty said the company launched a housing project in Bahrain in November, though the land was bought in 2010.

“Bahrain is a small and price-sensitive market. We have priced it well and sold 200 out of the 400 units in the first phase,” Ajmera said.

Rahul Nahar, chairman of Pune-based XRBIA Developers Ltd said the company is developing a project in London with a local developer. “It’s affordable housing and is located in the suburbs, and not prime London. Budget housing projects have takers there,” he said.