No threat of realty takeovers

October 3, 2008	(Be the first to rate this story!)  Loading ...
Print This Story   Email This Story Subscribe Newsletter

Indian developers don’t feel they are facing anything threat of takeovers despite the real estate downturn. In a scenario where most companies are heavily leveraged and that too at high interest rates, analysts say the smaller firms could be up for acquisition. “If the depressed market takes a longer time to rebound, then anything is possible including mergers and acquisitions,” says Anshuman Magazine, managing director, CB Richard Ellis. “Companies with high levels of debt may be forced to sell some stake to bigger players in order to survive.” Some industry executives suggest that if the downturn persists for some more months, smaller firms may be up for grabs. But others disagree with this view. Pradeep Jain, chairman, Parsvnath Developers Ltd. adds that developers who have the ability to hold on could manage to ride over the crisis even if they manage to sell one or two of premium priced projects.

Analysts point out that the real estate sector is suffering from high valuation expectations of promoters on one hand and the reluctance of fund managers to take exposures on the other. “Since many companies are currently trading at 30 to 40 per cent of their peak share price levels, the promoters are reluctant to divest. As a result, there is a huge gap in expectation and reality,” they added. The valuation dynamics have also undergone a major change. Developers are still looking at land bank and its value as the intrinsic value of their stock, while fund managers are looking at cash flow and the ability to deliver and sell actual products in the market in the next 12 to 24 months.

News Published Under:   Real Estate Developers |

Comments