Real Estate Biggies Worst Hit by Crisis

May 4, 2009	(Be the first to rate this story!)  Loading ...
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Real estate developers with a pan-India presence are in trouble. With few buyers in the market, majority of their projects have not taken off in various markets, say realty consultants. Almost all major real estate developers such as DLF, Unitech, Omaxe, Parsvnath Developers and Emaar MGF had moved out from their core areas to construct projects in different cities. However, 65-70% of these projects have not taken off. DLF, for instance, recently pulled out of many commercial projects in Gurgaon and Manesar. Buyers also moved out of the developer’s Garden City Residential project in Chennai. Similarly, Unitech’s projects in Kolkata and Mohali have also not taken off as per plan. A severe cash crunch has also made Parsvnath Developers hold back its plans to construct several projects that were in the pipeline.

Kaustuv Roy, executive director at consultancy Cushman & Wakefield says performance of any player depends on the cost of land acquisition. “Those developers who picked up land at a higher value in the last two to three years are facing a tough challenge in these times. They picked it up on the assumption that the market is going up and will continue to go up. But today they are facing a hard time as they cannot construct on the same value as when they had bought it.”

Many leading developers agreed that it has been an uphill task venturing into new markets. Says Sanjay Chandra, managing director of Unitech Group: “You have to see the picture from the other side too. For real estate companies having a strong brand value, the best way to grow is to open to a new market. It is true for any real estate player venturing out in new market as the gestation period is much longer. So it is for the large size developers to sustain and grow in pan-India.” “We have projects in every part of the country. The logistics and dynamics change in different markets so one has to adapt to changes and challenges accordingly,” says a DLF Group spokesman. Experts say developer who ventured into Tier II, III and IV cities are the ones who are facing major trouble now. “They went to these markets with certain assumptions of demand. These assumptions however were not met due to the economic slowdown. Hence the projects may have either not taken off or may have not been completed as per the promise,” adds Roy.

Mid-scale developers, present in fewer cities, say their strategy has been a boon, in retrospect. Kamal Taneja, managing director of Taneja Developers and Infrastructure, which has mainly projects in northern India, says their approach has helped. “Developers who have large tracts of land in lesser places are better off. There is a lot of time, energy and management that goes into pan-India projects. We have been more concentrated on consolidation and delivery…that has definitely helped in these times.” Ditto with BPTP, which has no plans of moving beyond the National Capital Region market for now. “We have no plans of moving outside. Every city has its own laws and bylaws. We are more concentrated on the NCR market at present,” says Sudhanshu Tripathi, director at BPTP.

News Published Under:   Gurgaon, Real Estate Developers |

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