DLF to build affordable homes, Parsvnath puts projects on hold

DLF to build affordable homes, Parsvnath puts projects on hold
Financial Express, 03 February 2009, Page VIII

fe Bureau

New DelhiThe country’s largest real estate developer, DLF Ltd, which reported a 69% decline in its third quarter profit on Saturday, said on Monday that it will reduce prices of its future projects by 15%, develop 20 million sq ft of affordable housing, raise Rs 2,000 crore from selling non-strategic assets and clear its short term debts by raising long-term funds.

Meanwhile, another Delhi-based developer, Parsvnath Developers Ltd, which reported a 95.18% decline in net profit, said it has pledged 10% of its promoters' share, put its retail and overseas projects on hold and has adopted a go slow mode with its SEZ projects. “We have approached financial institutions to restructure debt and give a moratorium for 9-12 months,” chairman, Parsvnath, Pradeep Jain, said. The company’s net debt as on December 31, 2008, stood at Rs1,825 crore with an average interest cost of 13.59%.

DLF said that it is not ruling out job cuts if the business environment continues to be lull. In order to reduce DLF's receivables from DLF Assets (DAL) it is planning to raise funds to the tune of Rs 2,500 crore.

“After this (15%) rate cut, price of products will be at par with what it was a decade ago,” claimed, vice-chairman, DLF, Rajiv Singh. He said that the property market has come to a 'virtual shutdown' with sales declining by 10% to 25%. As a result, current projects are being offered at significantly cheaper rates.

Singh said that DLF will enter the Rs 20 lakh to Rs 40 lakh market for affordable housing. It will develop around Rs 2 crore sq ft of space for affordable housing in the next few years. These residential units, which will be priced at Rs 2,000 sq ft to Rs 2,500 sq ft, would have fetched DLF Rs 5,000 crore in normal times.

DLF is planning to raise Rs 2,000 crore by March 2009 to clear its short term debt. It has already raised Rs 1,000 crore in the third quarter of this financial year. It has a short term debt of Rs 4,000 crore which has to be cleared by the middle of 2009. “We are not going for any off market borrowing or pledging of promoter’s shares to get funds,” Singh said.

The promoter group company DAL is planning to raise Rs 2,500 crore through private placement of equity. DLF will also stop the sale of its assets to promoter group company, DAL, in the short term as demand for leased office space shrinks sharply and receivables from DAL rise dramatically. The receivables from DAL at the end of second quarter was Rs 4,800 crore.

It is also planning to raise Rs 2,000 crore by selling its non-strategic assets. “This could be surplus land or a non-core business like power,” Singh said.

On Monday, shares of DLF closed lower by 13.54% on the Bombay Stock Exchange at Rs 153.20 whereas Parsvnath shares tanked 1.94%.