NEW DELHI, INDIA, December 14, 2013 /24-7PressRelease/ -- Real estate developer Emaar MGF Land Ltd, a joint venture between Dubai-based Emaar Properties PJSC and India's MGF Development Ltd, plans to enter the affordable housing market in India to boost sales and profitability.---
The company is also looking at expanding its hospitality business in the country, K. Ramamurthy, chief executive officer, projects, Emaar MGF, said in an interview. The company, which has around 11,000 acres of land, expects the affordable housing market to drive growth even as luxury projects remain an important business segment for the developer. Emaar MGF will be investing around Rs.8,000 crore in the next 4-5 years, Ramamurthy said.
"There had been some gaps in assessment of project risk, flaws in cost estimation...and quality driven aspects," said Ramamurthy.
The company came under scrutiny after the Enforcement Directorate issued a notice to Emaar MGF in 2009 for alleged violations of foreign direct investment norms for purchasing agricultural land. The Central Bureau of Investigation has also issued a chargesheet to one of Emaar's ventures in partnership with Andhra Pradesh Industrial Infrastructure Corp. in Hyderabad in 2011 for undervaluing land for a luxury township. A series of allegations has also surfaced related to delivery delays in the Commonwealth Games Village project in New Delhi.
"We are looking at affordable housing as one of the areas where we get in to and then shine," said Ramamurthy. "Work is already on for these projects, and we are trying to finalize how quickly we can get into this."
Industry experts say that the company's current strategy might not be enough to turn around the situation.
"In affordable housing, the margins are lower at around 20-25% than conventional housing, which offers 35-40% profit margin. It may not help the company to the extent of reducing debt and generate enough liquidity for the projects," said Parikshit Kandpal, an analyst at Karvy Stock Broking Ltd. "The segment (affordable housing) takes longer to get settled into, so it might not help the company in increasing investors' confidence and reviving its image as a profitable venture anytime soon."
In addition to affordable housing, Emaar MGF will also expand its hospitality vertical.
"We have land in Jasola, New Delhi, where we are likely to bring about nearly 200,000 sq. ft of low-rise structures governed by the Delhi Urban Art Commission," said Ramamurthy. "In Gurgaon, we have started two projects, which consist of luxury residential apartments with 850 plus units and a hotel with 3 million sq. ft area."
The company has hotel properties in Jaipur and Hyderabad and is looking at hospitality projects in Coimbatore, Chennai and Goa, while negotiations are going on with joint venture partners for operating the properties.
"We are all waiting to see how the market is going to turn up now that the US market is looking up. These projects depend on market dynamics because we do not want to be stuck in the projects," he said.
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