Developers hit by credit crunch

October 12, 2008	(Be the first to rate this story!)  Loading ...
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The credit crisis is drying up private equity deals drying up and all major realty companies have picked up cash from private financiers at a whopping interest rate of 36-48 per cent per annum to save the blushes. According to industry sources, the developers acquired at least Rs 250 crore to Rs 1,000 crore from financiers in lieu of their existing projects in the last one month, since the US financial system crisis became acute. Though none of the developers were willing to go on record, many developers admitted in private that they had meetings with private financiers during the last couple of months and also picked up money. With tie-ups already happening at a project level, experts also don’t rule out mergers & acquisitions in the sector, if the situation doesn’t brighten soon. Says Arvind Mahajan, executive director of KPMG India: “A lot of projects announced may not happen. With significant pressure on companies, they are likely to go for restructuring and focus on selective projects in the short to medium term. There will be more tie-ups at the project level. For realty players, these will be testing times that will check whether they are strong enough to weather the downturn.”

Stock prices of major realty players, including DLF, Unitech, Housing Development & Infrastructure Ltd (HDIL), Indiabulls Real Estate, Puravankara Projects, Parsvnath Developers, Sobha Developers, Omaxe, Mahindra Lifespace Developers and Ansal Properties & Infrastructure have all tumbled more than 60 per cent in the last one year on Dalal Street. Badri Narayanan, partner, Ernst & Young India, agrees with the notion of private equity players that long-term opportunities exist in India but needs cautious valuation. “They are waiting to discover new value paradigms before they make any fresh investments in the realty space. Developers, on the other hand, are likely to have a re-look at their business models and re-asses consumption patterns to bring it in line with the current market expectations,” he said. Industry sources, in fact, said that across all metros and tier II cities like Mohali, Kundli (Sonipat), Jaipur, Lucknow, Indore, Surat and Cochin, there has been a 90 per cent drop in the number of deals.

News Published Under:   Real Estate Developers |

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