Realty firms confident even after stocks fall

September 15, 2008	(Be the first to rate this story!)  Loading ...
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Domestic realty stocks witnessed a downfall after US investment bank Lehman Brothers Holdings Inc., an investor in some of these firms, said it intends to file for bankruptcy. The real estate firms involved said they would not be affected as Lehman’s investments had already been credited to their accounts. Shares of realty firms in which Lehman Brothers has directly or indirectly invested in fell sharply. Analysts said the crash in real estate stocks was on account of heavy selling on concerns over future funding for real estate firms. “Real estate shares must be down because of a combination of Lehman’s bankruptcy news and the fact that real estate stocks are traditionally high beta stocks,” Unmesh Sharma, an analyst with Macquarie Research, said.

Stock prices of India’s leading real estate developers DLF Ltd and Unitech Ltd were down by 7.5% each on the Bombay Stock Exchange, or BSE. Shares of Mumbai-based Orbit Corp. Ltd, in which Lehman owns shares, were down 11.69%. These stocks—together with other plunging shares of realty firms such as Ansal Properties and Infrastructure Ltd and Housing Development and Infrastructure Ltd (HDIL) — dragged the BSE realty index down 7.65% in comparison with the Sensex, the bourse’s benchmark index, which fell 3.35%.

The firms that had investments from Lehman Brothers Real Estate Partners, a $4 billion, or Rs18, 360 crore, realty private equity fund, meanwhile, shrugged off worries. The fund has so far invested more than $380 million in realty firms and their units here. In 2007, the fund invested $200 million in DLF Assets Ltd, the promoter-owned company of DLF, that a company spokesperson said DLF Assets had received entirely. A Unitech spokesman said the firm, too, had received money from Lehman. In June, Lehman agreed to invest $175 million for a 50% stake in the initial phase of Unitech’s Santa Cruz project on the western expressway of Mumbai. According to the agreement, Lehman gets 50% equity in the specially floated firm that will develop 1 million sq. ft of an 18 million sq. ft office space project. Lehman also holds direct stakes in Orbit and Hyderabad’s IVRCL Infrastructures and Projects Ltd. The fund has a 4.82% stake in Orbit and a 1.20% stake in IVRCL. “Lehman picked up the stake during our initial public offer for $4 million and they paid up the entire amount,” Pujit Agarwal, Orbit’s managing director, said on Monday.

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