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Godrej dispute: British era land worth Rs 30 lakh can now fetch Rs 4.35 lakh crore, but it's divided the family

Rashmi Pratap     June 27, 2019

Godrej Group's 1,000-acre developable land parcel in Vikhroli holds revenue potential worth Rs 4,35,000 crore, nearly four times the market capitalisation of the group's four listed entities - Godrej Industries, Godrej Consumer Products, Godrej Agrovet and Godrej Properties.

Not surprisingly, its use and division has become the bone of contention between brothers Adi Godrej, Chairman of Godrej Group, Nadir Godrej, Chairman, Godrej Agrovet, and cousin Jamshyd Godrej, chairman of Godrej and Boyce.

Adi Godrej's grandfather Pirojsha Godrej had bought 3,000 acres in Mumbai from the British during the Second World War for Rs 30 lakh. He subsequently bought about 400 acres more, taking the total to 3400 acres.

The land, however, includes nearly 1800 acres of mangroves, which cannot be developed due to ecological issues. The developable land is 1,000 acres, which at the prevailing rate of Rs 40 crore per acre in most suburbs of Mumbai, is alone valued at Rs 40,000 crore.

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In response to an e-mail query, Adi and Jamshyd Godrej jointly said: "We have been working on a long term strategy plan for the Group for several years. As part of this exercise, we have sought advice from external partners to help us think through options."

Recently, Mumbai-based Runwal Group entered into an agreement to buy 13 acres of land in eastern suburb of Kanjur Marg at Rs 38 crore per acre while Godrej Properties itself paid Rs 84 crore per acre to purchase RK Studios in Chembur, Central Mumbai. And, Japan's Sumitomo this week agreed to pay Rs 746 crore per acre for a three-acre land parcel in Mumbai's commercial hub Bandra Kurla Complex.

"This (Vikhroli land) is a goldmine and such land parcels in developed locations are scarce. It is a highly valuable piece in a city grappling with shortage of land," says Pankaj Kapoor, founder and MD at real estate consultancy Liases Foras.

The current floor space index and fungible area rules in Mumbai allow builders to develop a saleable area of around 4.5 to 5 times the land parcel. This will turn the 1,000 acres land into to a saleable area of nearly 5,000 acres or around 218 million sq ft.

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Godrej Properties, the real estate arm of the group, headed by Adi Godrej's son Phirojsha Godrej, is already developing a project in Vikhroli, called The Trees. With a prevailing rate of Rs 18,000 per sq ft in that project, a ballpark of Rs 20,000 per sq ft will make the developable land bank a Rs 4,35,000 crore property.

Most of this 1,000-acre land is housed under the unlisted Godrej and Boyce, which is best known for manufacturing consumer durables, furniture and locks.

Godrej Properties chairman Pirojsha Godrej has been repeatedly talking about developing the group's land bank, including in Vikhroli. While The Trees is fully owned by Godrej Properties, it is also planning to develop two other projects in Vikhroli. The company had said it would charge a development management fee of 10 per cent of revenue without giving details of land ownership. This land is probably housed under Godrej and Boyce.

Land has been a bone of contention historically and more so in Mumbai, where land prices have shot through the roof in the last two decades. "Land prices across Mumbai Metropolitan Region (MRR) continue to remain elevated as compared to historical levels. This comes at a time when the MMR market continues to grapple with high prices, sizeable levels of unsold inventory and a funding squeeze. While this may seem counter-intuitive, we believe that supply of clean and unencumbered land in Mumbai's city and suburbs continues to be scarce," Adhidev Chattopadhyay, research analyst with ICICI Securities, said in a report.

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As the buyers of these land parcels are larger and organised players such as Oberoi Realty and Godrej Properties - who command a premium for quality and certainty of execution - a price correction in MMR may be limited to stuck projects of other developers, Chattopadhyay added.

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