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Land ahoy: Will the buying craze continue in FY25?


Land transactions scaled a record high in 2023, fuelled by a boom in home sales. Delhi-NCR, Bengaluru, Mumbai Metropolitan Region (MMR) and Hyderabad saw the highest number of deals. Land prices, meanwhile, shot up. Mint explains what to expect this fiscal:

What’s propelling land transactions?

Land deals were down to a trickle before the pandemic in 2020, when the residential sector witnessed a prolonged slowdown. Since 2021, transactions have seen a steady rise, reaching a peak in 2023, mainly led by the residential sector, warehousing and logistics. The spurt in home sales led to more liquidity among developers, who are building a supply pipeline by investing in acquisition of land across the top tier cities. Around 97 land transactions for over 2,700 acres were recorded in 2023, compared to 2,500 acres across 82 deals in the preceding year, according to Anarock Property Consultants.

What kinds of deals are we seeing now?

Top developers are preferring to buy land given their ability to raise capital from the public markets and healthy cashflow. Godrej Properties and Prestige Group are buying land to enter new property markets and in cities they already operate in. Regional developers, who have seen good sales traction, are also in the fray to acquire land. Bengaluru, Hyderabad, NCR have seen multiple land deals this year. Developers are looking at both smaller land parcels for premium projects as well as bigger parcels for large format developments. The joint development route, which is less capital intensive is in vogue, too.

 

Could elections have an impact on land deals?

The general elections, which will be held in phases starting this month, may slow down and acquisitions during the June quarter. Typically, project approvals as well as construction in real estate projects slow down during the polling season, and land deals are no exception. The land-buying momentum is expected to pick up pace again in the September quarter.

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How have land prices moved?

The average transacted value of land touched 16.5 crore per acre in 2023, up 46% from the previous year, says property advisory JLL India. The staggering rise could be due to land transactions in Tier I cities and prime micro-markets. MMR, the country’s most expensive property market, saw a spurt in land deals and contributed significantly to the increase in the per-acre transacted value. Land prices are a factor of demand and supply and, in the current scenario, a larger capital pool is chasing limited opportunities.

Will land deals pick up further in FY25?

Land transactions are expected to remain steady this year but grow in the latter half of the year, as developers look to expand their land banks due to growing housing demand and with support from institutional funding agencies. While Tier I cities will lead land deals on the home front, plotted projects may trigger more land activity in some Tier II cities as well. Homes apart, warehousing and logistics projects will trigger land deals, followed by commercial office, retail and hospitality projects.



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