Buoyed by regulatory overhaul and infrastructure boom, engineering conglomerate Larsen & Toubro (L&T) has identified realty business as one of its growth engines for the next 10 years and plans to acquire land parcels while expanding pre-sales, said a senior company executive.
L&T Realty has started looking out to acquire land parcels and grab partnership development opportunities across markets to scale up its business.
“We are making some strides in that direction, albeit cautiously.
"We are looking for something in the range of 50-60 acres, mostly in Bengaluru and NCR,” Anupam Kumar, managing director and chief executive officer, L&T Realty, told Business Standard.
“L&T looks at businesses that have growth potential and alignment to the larger organisation.
"Whichever area L&T sees growth for the next 10 years, the impetus is on that.
"That is how realty has been recognised as one of the major growth businesses for the company,” he said.
The company entered the realty business, its only business-to-consumer (B2C) segment, in 2010, predominantly relying on its existing land parcels, Kumar said, adding that the existing land bank will soon start to diminish.
“The real estate journey initially started with monetisation of our land bank which arose due to the relocation of factories from cities.
"Since the land bank is limited, it will get exhausted in a few years,” he said.
Currently, L&T Realty has a portfolio of 61 million square feet (SQFT) at various stages of development.
It now plans to add close to 25-30 million (SQFT) every year, which, Kumar said, can give pre-sales of Rs 30,000 to Rs 40,000 crore a year.
The preference is not affordable housing but premium and affluent housing segments, he said, adding, the company keeps looking for opportunities to lease or monetise commercial development profitably.
He, however, ruled out any plans for launching a Real Estate Investment Trust (Reit).
L&T developed its IT businesses in the past and later listed them as separate entities on the exchanges.
On whether a similar approach will be taken for the realty business, Kumar said, “We are concentrating on building project pipelines for accelerated growth of business.
"When the business attains the right size, the option of listing to raise growth capital will be considered, but cannot indicate when.
"At the moment, the focus is on growth."
L&T clubs its real estate business under the ‘others’ category while reporting its financial results.
For FY24, the others segment reported net revenue of Rs 7,630 crore, and earnings before interest, depreciation and ammortisation (Ebitda) of
Rs 1,618 crore.
Kumar noted the real estate business’ current annual revenue was in the range of half a billion dollars (roughly Rs 4,200 crore in rupee terms).
At a consolidated level, L&T is executing India’s largest order book, valued at Rs 4.9 trillion as of June.
This appears to have both set targets and provided opportunities for its realty vertical.
“L&T is number one in most of the verticals it operates in.
"The realty business in L&T can be sizable and be among the top players, given the steep market growth opportunities,” Kumar said.
Kumar does not expect the historic cyclicality of the realty sector to come back in the near future, especially with urbanisation and infrastructure drive accelerated by the governments.
The realty division looks to develop projects close to transport infrastructure/hubs to help customers have a “good mobility choice”, Kumar said.
“The regulatory ecosystem changes like GST and RERA have cleaned the sector substantially, leading to consolidation.
"Smaller and unorganised players largely vanished making the sector attractive for firms like us,” he said.
