Rashtriya Chemicals and Fertilisers (RCF), which owns close to 800 acres in the Sion-Chembur region in the heart of Mumbai, is planning to re-develop its residential areas with high-rise towers to unlock the value of its real estate assets. The public sector fertilizer major, whose residential colonies occupy about 300 acres, has appointed a consultant to design a blue-print to re-develop a part of the area with two-three residential towers.

“RCF will shift employees currently residing at the RCF colony to these towers and will offer the rest of the apartments to other public sector companies such as Indian Oil or Bharat Petroleum,” RCF Chairman and Managing Director US Jha told Business Standard. He pointed out that most of the buildings in RCF’s housing colonies were old and in a bad condition.

“Restoration of these buildings will cost close to Rs 300 crore. We are planning to optimise the value of this land by building towers for our own use and for the use of other public sector undertakings,” Jha said. He further noted that a part of the proposed high-rise buildings could also be used to house IT firms and even be converted into an IT park.

The consultant will provide the blue-print soon. RCF is planning to approach the government for various clearances and funds to go ahead with the project. Jha said RCF had so far not considered the participation of private sector Indian real estate developers in the project.

“We will not sell or rent our premises for real estate or related commercial ventures. We will invite bids after the clearances. They (the companies) can help us construct the towers,” he said. It may be noted that RCF’s land in Mumbai has been a prime target for real estate players for many years. In the last few years, there have been several media reports that RCF may sell a part of its real estate assets as a part of the government plan for divestment of loss-making public sector units.

According to sources, RCF’s plants are spread across about 400 acres and its residential colonies cover about 300 acres. More than 100-150 acres could be utilised for various commercial development purposes, including captive expansion, RCF cannot utilise the property for non-related businesses as per the land acquisition norms laid down at the time of the commissioning of RCF, the sources added. As reported earlier, RCF is also working on a project to unlock the value of its real estate assets by venturing into related chemical businesses by setting up a chemical park and a chemical commodity exchange in its premises. The company also had close to 700 acres at its Taal facility, sources said. RCF had also formed a joint venture with Rapid Building Systems of Australia for setting up a Rapidwall manufacturing facility at its Trombay unit at a cost of Rs 75 crore.

The Indian real estate is expected to enter the revival phase by end-this year and macro-economic and sector-specific factors will act as catalysts in this recovery, a top real estate consultancy said.
“Economic recovery during CY 2010-11 is likely to reinvigorate the interest of foreign investors in India’s real estate market. We expect enhanced capital inflow in the Kerala real estate sector in the medium-to-long-term,” Jones Lang LaSalle said in its report.
Initial yield is expected to show compression during CY 2010-11 and capital values are likely to decline during 2010 before recovering in 2011, the company said in the report.

“Initial yield has already started to show a declining trend during 2009 which is likely to be the case in the near-term. Yield on 10-year Indian Government Bonds is likely to harden due to higher fiscal deficit,” it said.
“Real estate is the single biggest business in the country creating high employment. This business needs to be strongly encouraged for the growth of our economy”, stressed Mr Adi Godrej, Chairman Godrej Group. Viewing affordable housing as garnering good opportunities in the sector, he said that land cost and mortgage rates need to continue to remain at reasonable levels to have developers invest in low cost housing. “Affordable housing can add 1%-1.5% to our GDP growth. Also the need is to have well planned urbanization with clear policies ad regulations.

Sharing his perspectives of the real estate sector, Mr Niranjan Hiranandani, Managing Director, Hiranandani Constructions emphasized that lessons have been learnt by the developers and the time is now ripe to reboot the Indian real estate sector. Talking about the plethora of regulations governing the Indian real estate sector, he called for a transformation in the regulatory system of the country.
The report said although the high fiscal deficit is likely to harden interest rates in the economy, all other macro-economic variables are expected to improve during CY 2010-11 which is likely to induce real estate market recovery after the slowdown of CY 2008-09.
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