Strategic buyers and investors are aggressively looking for real estate companies with sizable land parcels currently under bankruptcy administration for loan defaults, particularly in cities, as the demand for residential and commercial properties increases. Despite the difficulty of insolvency, investors are still showing a lot of interest in these businesses and their projects since they have tangible assets like incomplete buildings and land parcels, along with a certain percentage of sales. Some of the notable take over recently have been Adani Good Homes taking over Radius Estate, Max Estates taking over the Delhi One project and Labdhi Lifestyle taking over a defunct Rajesh Lifespaces’ project in Mumbai.
Strategic buyers and investors are aggressively looking for real estate companies with sizable land parcels currently under bankruptcy administration for loan defaults, particularly in cities, as the demand for residential and commercial properties increases.
Despite the difficulty of insolvency, investors are still showing a lot of interest in these businesses and their projects since they have tangible assets like incomplete buildings and land parcels, along with a certain percentage of sales.
The resolution plan proposed by Adani Good Homes for the city-based developer Radius Estate was approved in January by the Mumbai bench of the National Company Law Tribunal (NCLT).
The resolution plan for Max Estate's Boulevard Projects was also accepted by the bankruptcy court's New Delhi bench, opening the path for the residential development "Delhi One" to resume construction. The Max Group's real estate division is called Max Estate.
According to experts in the industry, stressed assets have their own issues but are significantly less expensive. The land banks of real estate corporations under CIRP, however, can be a lucrative bargain given the skyrocketing prices in the real estate market. This is more relevant in big cities because a lack of available land combined with high costs makes it appealing for developers to look at failing businesses. Real estate investors that are interested in taking on such projects are coming up with solutions to the problems.
In an interview captured by ET Realty, Labdhi Lifestyle's CEO, Vikas Jain, identified a major obstacle in acquiring distressed real estate projects, even if they have a higher potential for recovery. This obstacle is the lack of financing. However, Labdhi Lifestyle aims to establish an ecosystem that will enable them to take over such projects, which have revenue visibility, and use their execution capability and financial strength to turn them around successfully.
A stressed Rajesh Lifespaces project was recently acquired by Labdhi Lifestyle in a quadripartite deal between the developers and the project's lenders, Mirae Asset and JM Financial, close to Mumbai's business center Bandra-Kurla Complex (BKC). With this acquisition, Labdhi has taken over as the project's principal developer, while previous developers and financial backers have received an exit. This was Labdhi's second purchase of a project in Mumbai that was under similar pressure.
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