Limited supply and high demand is seeing an increase in returns from Indian realty, as corporates rush to cash in, on what many view as a major asset for your tomorrows. This rapidly growing trend has seen many large and mid-sized Indian firms consider making real estate a part of their core activity, so that they can realise 30-35% returns that the Indian real estate market has been generating, in recent times.

In order, to realize their realty plans, companies have been resorting to various means, including amending their firm's Memorandum of Association, which is but a statement of the company's objective, all so to include real estate as a principal activity. According to sources, acquisition of large stakes in unlisted small companies having real estate interests is just another method that is being employed.

Of the firms that have recently indicated their intentions in realty development, include Century Textiles (part of B.K.

Birla Group), Vardhman Industries, Gulf Oil, BF Utilities, Hyderabad Industries and Shree Pre-Coated Steel.

Wishing to develop its sprawling 30-acre Worli land for retail activities, Century Textiles has gradually shifted textile operations from its Worli unit to Gujarat. As B.K. Birla, group patriarch stated earlier on: "We may sell the land and buildings or build our own buildings." Interestingly, Aditya Vikram Birla, his grandson and Group Chairman Kumar Mangalam Birla have also announced their intention to enter the retail sector, benefiting from the possession of large captive land in India's financial capital.

As for Vardhman Industries, growth options in real estate have led it to amend its Memorandum of Association by

including the clause to "decide in future to diversify into real estate business." The amendment has already been approved by company board members, including the putting up of a proposal for clearance from shareholders' through postal ballot special resolution.

"What all this means essentially is that companies are trying to realise the true potential of their land holdings, especially in cases where the value of their business is much less than their real estate assets," says Ritesh Vora,

Director - Investments at Saffron Asset Advisors, which has invested about $27-million in Indian realty projects from the $230-million raised through two India-dedicated realty funds. Mumbai-based brokerage SSKI Securities expects a total demand of 160.5-million sq. ft. for commercial real estate by 2010 from the IT and ITES sector alone.

Gulf Oil, a part of the Hinduja Group has also made a public announcement of its intention to enter real estate.

Subhas Pramanik, Managing Director says Gulf Oil is set to diversify into real estate to unlock the potential of realty assets. As well, the company proposes to develop knowledge parks and special purpose vehicles for infrastructure development.

Then, there is Shree Pre-Coated Steel, a special steelmaker, currently focused on developing growth from real estate. Recently, it decided to acquire 85% of Jolly Brothers, a company with leasehold right for 66- acres in Central Mumbai's - Kanjurmarg.

Wind energy company BF Utilities, a Bharat Forge unit, has gained from the recent boom in real estate, and so has ceramic tile maker Anant Raj Industries, whose Director - Amit Sarin has gone on record to say 85% of the firm's 2nd quarter revenue came from real estate, and currently, the company holds about 800-acres of land.

Industry sources confirm there are many instances of funds buying out sick and ailing firms with large land holdings. A prime example are defunct textile companies in Mumbai, which after being cleared by the government and the courts, are developing their real estate into large retail outlets.

Termed as another major driver of Indian real estate, the organised retail market is expected to increase to $35-billion by 2010 from the current $7-billion, thereby boosting real estate demand in Tier I and II cities, and increasing pressure on land.

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