Mumbai’s Largest Slum Redeveloper Plans Asset Sale To Pare Rs 9,000-Crore Debt

Mumbai’s largest slum redeveloper is looking to sell assets to pare debt at a time the real estate sector is facing a funding crunch.

Omkar Realtors and Developers Pvt. Ltd. had a consolidated debt of Rs 9,107 crore at the end of March 2018, according to the data on the Ministry of Corporate Affairs’ website. The company, however, hasn’t disclosed its latest financials and consolidated debt. “As a policy, we cannot give specific financial details,” Gaurav Gupta, director at the real estate developer, told BloombergQuint. “But we have a clear path to reduce debt.”

That includes selling 2 million square feet of commercial real estate in Andheri in suburban Mumbai. The project spread across 7.5 acres of land is part of the 65 acres of mixed-use township—Omkar International District—coming up on a slum land near Mumbai’s Western Express Highway.

“We are in talks with a few of the very active real estate funds and developers for this deal. Either the funds or the developers will pick this up,” Rahul Maroo, president and chief of strategy and international business at Omkar Realtors and Developers, told BloombergQuint. “We are hoping to close this deal in the next nine to 12 months. As per the current market condition, we are estimating a valuation of around Rs 3,000-3,500 crore.”

That comes as real estate firms find it difficult to borrow more or repay existing debt as the IL&FS crisis caused a liquidity squeeze for non-bank lenders, the biggest financiers for developers. Given the current situation, it may be hard to find takers at high valuations. Private equity players or funds usually look for operational projects rather than buying land.

Maroo, however, said the company is undertaking these “strategic moves” so that its fund situation is not stressed. “We are also getting inflows from the stock that is being sold.”

Joint Projects

The Mumbai-based developer, building up to 21,500-square-feet luxury apartments overlooking the Arabian Sea at its 1973 project in Worli, is eyeing joint development with other realtors where the company would hold 40 percent stake with the partner owning the remaining 60 percent. Omkar, Maroo said, will take up land development and slum rehabilitation while the construction of the saleable area, marketing and sales will be handled by joint venture partners.

Slum redevelopment projects allow developers to build additional saleable area that can be sold at market prices.

Omkar has already tied up with Godrej Properties Ltd., Piramal Realty and Larsen & Toubro Ltd.

Earlier this year, it partnered with Godrej Properties for its 4.25-acre land parcel near Bandra-Worli Sea Link which offers 1.1 million square feet of saleable area. Godrej Properties, in its investor presentation for January-March, had said that it will get 60 percent revenue from the saleable area.

Omkar also has tied up with the Piramal Group for its Piramal Mahalaxmi project.

Piramal Enterprises Ltd.’s management, in an investor call after first-quarter earnings, said it sanctioned a Rs 1,100-crore loan to Omkar for the project, and the developer’s “share of their commitment is over, now it is only Piramal Realty to perform”. “Piramal Realty has launched all the three towers (of Piramal Mahalaxmi) and sold Rs 1,800 crore of inventory, of which Omkar’s share is already Rs 700 crore,” it said. “So even before the plinth, today we are sitting on Rs 700 crore of receivables of our Rs 1,100 crore loan, which is a five- to six-year loan.”

Omkar has a similar joint development project with L&T for Crescent Bay project in Parel, Mumbai. Both Piramal and L&T projects will have a standalone saleable area of 2.5 million sq. ft.

Omkar, with 12 ongoing projects in Mumbai is working on a land bank of approximately 80-100 acres in Mumbai that works out to 15-17 million sq. ft. of saleable area, Maroo said. The focus of the group right now is to complete the existing projects, sell the inventory rather than launching new projects, he said.