In the scenario of high land prices and tight liquidity, builders are increasingly exercising caution and adopting risk mitigation strategies to move ahead.
Where 18 months ago, they were ready to throw money on land parcels, they are now more realistic in acquiring these and seeing what they can build on that piece of land, and the revenue they can generate from it. Developers thus have to think before they buy land.
In case of newly acquired lands and difficulties in executing the project, developers are looking to selling one of their land parcels to fund the other projects. There are also those who may use their land banks as collateral to raise funds for their current needs. Joint ventures have been happening in the past, but they are now increasingly happening in a market that is stretched.
Developers are increasingly getting into joint ventures with landowners, other developers or private equity funds. Here the reward is back-ended and the landowner will get a share of the profits after the project is completed and sold. In this arrangement, the upfront cash amount required to be put in by the builder is reduced and hence to that extent reduces his risk.