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In Rajarhat, foreign gives way to local

Calcutta, July 3: Keppel Land, an early-bird foreign investor in Bengal’s real estate, has packed its bags, selling an unfinished high-end project in Rajarhat that had run into syndicate-related problems two years ago.

The Singapore-based Keppel has not blamed anyone for its exit but real estate veterans cited multiple reasons, including the “climate of Bengal” with which local investors appear to cope better than those from outside.

The Keppel sale also suggests local investors are willing to try their hand at something guests in Bengal are finding it difficult to manage.

Keppel and its two Indian promoters who hail from outside Bengal have sold the Elita Garden Vista, a 17-tower, 25-acre project in Rajarhat Action Area III, to three city-based developers for Rs 150 crore.

The buyers are Pradeep Sureka, Sushil Mohta and Rajendra Bachhawat. The sellers’ consortium is made up of Keppel Land; Magus Estates & Hotels, a subsidiary of Asian Hotels (North) Ltd of the Jatia Group; and Puravankara Group from Bangalore.

Keppel did not explain why it had joined the list of real estate developers from outside Bengal who have developed cold feet about the local market.

“Keppel Land does, from time to time, look at opportunities to streamline our portfolio and unlock value to re-deploy capital-yielding projects,” the company said in response to a questionnaire from The Telegraph.

Asked what had gone wrong and the reason for the delay in executing the project, the company said: “No comments.”

Keppel also refrained from commenting on law and order in Rajarhat, which had witnessed a recurrence of clashes recently among supplier factions known as “syndicates” and enjoying political patronage.

Real estate circles cited some probable reasons — none of which are unique to Calcutta but, in the absence of depth in the market, appear to take a more pronounced toll on the city than on other cities.

“The Calcutta market has not grown as fast as some other cities. Second, there are many challenges at the local level. Given that the pie is small, outsiders are not keen to invest time and money,” said Abhijit Das, director of Cushman & Wakefield, a consultancy.

Sources said Keppel tried to manage the business by sending executives from headquarters but they lacked the local expertise to run the business.

“Real estate is a localised business. You have to know how to manage the environment. We know the climate in Bengal. We know there will be two months of heat followed by two months of rain,” said Pradeep Sureka, director of the Sureka Group.

Sushil Mohta, director of the Merlin Group, said Rajarhat would not pose any exceptional challenge to the new owners.

“We will ensure that the rest of the project is completed within schedule. Keppel has completed eight towers. The new consortium will do the rest of the nine towers and one commercial block,” Mohta said.

National real estate players like DLF and Unitech did not expand operations in Bengal after an initial burst in 2006-07 when several land parcels were picked up. They sold some of their existing assets to local players, too.

Other metros also face problems such as extortion and demands by groups that supply construction materials. But the developers manage to even out the odds because of the size of the markets in cities like Mumbai, Pune, Gurgaon and Bangalore.

A piece of statistics made public today reflected the challenge before Calcutta. Office space consumption dropped by 30 per cent in Calcutta while going up by 26 per cent nationally between April and June, according to global consultancy CBRE.

The bottomline appears to be that in the absence of increased economic activity, the big boys will find the Bengal real estate climate inhospitable.