MNCs often resort to divest their real estate properties in the prime locations to overcome their financial crises.
Real estate divestment : best means for bigger corporates to cut off their debts.
Many Indian Corporates and MNCs fell in debt due to sluggish market and economic recession. This sluggish market situation forces many of the Indian corporate to divest their prime real estate assets.
Mounting debt has become a serious issue and problem for the Indian Corporates and MNCs. Many of them are left without any choice than to divest their real estate assets especially which are in the prime areas. Some of them resort to leasing and other monetization methods.
High interest rates are a big problem for them as they do not allow the Indian corporates to take some loans. They are forced to find some other way. Indian corporates are in dire need of money both to cut off their debt as well to have a financially consolidated position.
Without any doubt there is no easier way than divesting and monetizing of real estate assets. It is highly suitable for raising a quicker fund. Selling real estate properties (be it commercial or residential) in prime locations is easier. So to say it is easier than offloading their non-core business.
Indian corporates find no meaning in blocking assets worth crores of rupees in maintaining a property. Rather this fund can be well used for expansion of their business. Real estate properties are always demanded. This is not visible with other commodities or possessions.
In a embarrassing way Vijay Mallya could not find any taker for his debt-driven airline Kingfisher. At the same time he could easily find out takers for his real estate assets. Some private equity firm bought his real estate property.
Air India has already announced its plan to monetize its real estate assets. It has approached a global real estate consultant for the same purpose. Air India hopes to raise above Rs.5000 Cr through monetizing its real estate assets. The national carrier will raise most of the value by monetizing its properties in Mumbai, Bangalore and Delhi.
BSNL and MTNL also have plans to monetize their real estate assets. They have invited bids from real estate consultants. BSNL has properties worth thousands of crores in many of the cities across India. MTNL has properties mainly in Delhi and Mumbai.
Do not assume that only government firms are planning of divestment. There are many private firms too. Lack of private equity funds and higher interest rates cause them bid their real estate properties.
Gammon India has already announced their plans to cut debt by divesting their real estate assets. The firm expects to cut off the debt by liquidating its real estate portfolios.
Economic Times reported that Citibank has sold over a dozen flats in some prime areas in Mumbai. Citibank has recently sold off a 2,550 sq. ft. flat in Malabar Hill’s Palazzo at a record price of Rs.28 Cr.
Jones Land LaSalle India’s Ambar Maheshwari said that the main reason is that most of the corporates invest in real estate at the good times. This is because the real estate always has higher demand and appreciation. They divest their real estate assets in their bad times and easily recover the crisis and debts. He added that this is normal phenomenon.
The value factor is overcome by the prominent location and limited supply. This is the reason why there is higher demand for some prime- located properties rated Rs.1 lakh or above per sq. ft. Meanwhile some newer projects remain unwanted and demanded due to higher prices. They are never rated as high as these properties at the prime locations.