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Bankrupt, stressed realty projects on investors’ radar

As demand for residential and commercial properties picks up, several strategic buyers and investors are actively scouting for real estate companies with large land parcels currently under bankruptcy administration for loan defaults, especially in cities.

Despite the challenge of insolvency, these companies and their projects are still finding good interest from investors given the presence of tangible assets including the land parcels and unfinished structures with a certain portion of sales achieved.

In January, the Mumbai bench of the National Company Law Tribunal (NCLT) approved the resolution plan submitted by Adani Good Homes for the citybased developer Radius Estate.

Also, the bankruptcy court’s New Delhi bench approved the resolution plan for Max Estate’s Boulevard Projects that paved the way to resume the construction of the residential project ‘Delhi One.’ Max Estate is a real estate arm of the Max Group.

“Stressed assets come at a much lower price albeit with their own complications. But with the soaring prices in the property sector, the land banks of a real estate companies under CIRP can be a lucrative deal,” said Prachiti Shah, managing partner of law firm Nanavati & Nanavati Advocates.

According to her, this is significant in metropolitan cities, where the scarcity of land coupled with high prices makes it attractive for developers to look at companies facing bankruptcy. Realty developers are keen on picking up such projects are devising strategies to overcome the challenges.

“Lack of financing for the acquisition of a stressed realty project despite its higher feasibility of recovery is a key challenge. We are trying to build an ecosystem where Labdhi can take over such projects with revenue visibility and turn them around with the help of its execution capability and balance sheet strength,” said Vikas Jain, CEO, Labdhi Lifestyle.Labdhi Lifestyle recently acquired a stressed project of Rajesh Lifespaces’ near Mumbai’s business district Bandra-Kurla Complex (BKC) through a quadripartite agreement between both the developers and the project’s financiers Mirae Asset and JM Financial.

With this acquisition, Labdhi has become the lead developer of the project, existing developers and financial partners have received an exit. This was Labdhi’s second acquisition of such a stressed project in Mumbai.

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