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Wadias, Piramals, Godrejs, Lalbhais and Tatas plan to develop land bank

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MUMBAI | NEW DELHI: A clutch of India's old and storied business houses are turning real estate into their core business , unlocking revenue potential in large tracts of land held by them over generations. Bombay Dyeing scion Jeh Wadia is revamping his empire with the aim of earning three-fourths of his group's revenue in five years from building homes, offices and malls.
Sanjay Lalbhai, whose Arvind Mills is one of the top makers of denim cloth in the world, also sees real estate as a key revenue earner in the years ahead. They are not the only ones doing this. A host of old business groups with huge land parcels such as Piramals, Godrejs, Mahindras and the Tatas are looking to develop their land on their own, instead of selling the land to builders.
"They have huge tracts of land, so why not," says Pranay Vakil, chairman , Knight Frank India, a real estate consultancy, which advises many of these firms. "If they do it properly, it will be a windfall for shareholders who have shown faith in the management for so many years." Many of these groups are sitting on large land banks acquired when they bought businesses from British companies or as inheritance through generations.
As these old businesses became shadows of their former self or shut down as a result of liberalisation , many sold their land to builders to profit from the boom in the real estate market. "Why lose out on the development profit of the land we own," says Sanjay Lalbhai, managing director, Arvind Ltd, India's largest denim maker.
He says real estate is an important business for his company. While the group's total revenue is close to Rs 5,000 crore, revenue from real estate business today is only to the tune of Rs 100 crore. "But the future looks exciting," he says. Arvind is starting to develop some portion of its 600-acre land bank in Gujarat and Bangalore. It has already launched projects worth Rs 3,000 crore and by the end of March 2012, it will launch an additional Rs 2,000 crore worth of projects. "Real estate (business) takes time. So in next two-three years, we should see about Rs 1,000 crore revenue from real estate and this will multiply in years to come," he said.
Bombay Dyeing, a 132-year-old company known for its textiles and chemicals business, is also undergoing a major transformation. The promoters and the company's realty arm Bombay Realty has a land bank of nearly 10,000 acres across the country. This includes 700 acres of prime land in Mumbai bought at rock bottom prices by group firms Bombay Burmah , Bombay Dyeing, Britannia and current and erstwhile promoters in 1800s and 1900s.
The promoters now expect over half of the company's revenues this fiscal year to be generated by realty business , growing to 75% in five years. Such is the change in course that, Jeh Wadia, managing director, says, "We will essentially become a real estate firm in years to come."
"We are talking about an undisputed titled land bank of 10,000 acres. Coupled with our brand, we expect to leverage these land parcels for a superior profitable business proposition," Wadia says. In 2010-11 , the real estate division contributed nearly 25% of the company's total revenue of Rs 1,950 crore. While realty developers continue to struggle and shell out expensive money to buy land parcels that remain a scarce commodity, traditional Indian business groups such as Godrejs, Mahindras and Tatas, apart from Lalbhais and Wadias, already hold significant and prime land bank.

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