Emaar MGF floats unit with Aussie construction giant

Emaar MGF Land Pvt Ltd has entered into a 50:50 joint venture with Leighton Asia Southern, a part of the $8 billion Leighton Group which is Australia’s largest project development and contracting entity.

Emaar MGF Land Pvt Ltd has entered into a 50:50 joint venture (JV) with Leighton Asia Southern (LAS), a part of the $8 billion Leighton Group which is Australia’s largest project development and contracting entity. The new JV, Leighton Construction India Pvt Ltd, will begin operations with an initial investment corpus of $150 million.

Leighton Construction’s first assignment will be projects within Emaar MGF’s 3,000-acre township in Mohali. These include Mohali Hills and The Views, both of which are residential projects, and Central Plaza, a commercial complex. The company will also develop Palm Springs, a residential project in Gurgaon.

Said chief executive officer (CEO) of the new entity Greg Pauline: “We hope to generate $2.5 billion revenue from the joint venture and create 1 lakh jobs over the next five years.” He added that the JV would initially have its hands full executing Emaar-MGF’s projects, but might in future consider third-party real estate and infrastructure projects as well.

Story continues below this ad

Explaining the rationale behind the joint venture, Emaar MGF executive vice-chairman and managing director Shravan Gupta said: “Even internationally, developers do not do the construction work themselves but contract it to specialist companies…. Indian developers contract the construction work to different companies in different cities. By tying up with one large player who will execute our projects across the country, we will have uniform quality standards and greater accountability.”

He added that the challenge in India is to raise quality standards. Leighton recently got ISO 18,000 safety certification in India. Commenting on the opportunities available to new construction companies in India’s fast-growing real estate market, Gupta said: “The order books of Indian construction companies are full up to three-four times their capacity.”

Given the shortage of professionals in the Indian construction company and the need to implement international quality projects, the JV will try to rope in Indian construction industry professionals working overseas, explained Pauline. Construction practices in India fall short of international standards on several counts — quality, timely delivery, adherence to onsite safety norms and environmental standards.

Faced with the challenge of delivering international quality projects, Indian developers are tying up with construction companies from abroad. In February 2006, DLF tied up with UK-based construction major Laing O’ Rourke.

Story continues below this ad

Gupta said while the construction company would not go public, Emaar MGF might go in for an initial public offering (IPO) in 12 months to raise money for future projects.