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« Real Estate Agents Form New Organization | Home | Property Owners Queue up to Sell Shares in Asian Trusts »

Small Property Developers Selling to Big Players

Most small time real estate developers in India are looking out to liquidate their land by selling them to larger developers or equity players. In an effort to rescue themselves from the liquidity crunch, they are even ready for lower cost.

Property rates are believed to undergo major price corrections soon. Therefore we thought of being secured rather than be at risk”, says a property developer.

Prominent players such as Parsvnath have 5 or 6 such deals to be finalized. The small time developers are offering land that they had acquired earlier.

Runwal Group also informs to have received similar proposals, primarily from Pune and Nagpur. The company has not fixed any deal yet but is working on.

Small developers are short of capital and funds in the market are drying up. Selling incomplete projects to big developers is the only productive option left with such developers, says Pranay Vakil, Chairman, KnightFrank India, a premier property consultant. Home sales have fallen down to 70%, he adds.

Reducing demand for properties in India may force the developers to cut on prices in near future. The trend is apparent in several suburban markets.

The residential property market remains stagnant for the past few months but has started loosing the potential again, especially in Mumbai’s suburban markets and tier II and III cities. The sales are believed to drop by 70-80% in the last two months.

Also, the finance ministry is trying to restrict flow of foreign funds in the market. The authority says to curb all the foreign funds raised by Indian companies, through the issue of partially convertible preference shares, would be regarded as debt and be subject to norms applicable for external commercial borrowings (ECBs).

Now, the situation has become difficult for small developers who were largely in need of foreign funds to complete their real estate projects as ECBs are allowed only in large property projects. Add to that, the guidelines are more stringent than FDI.

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