Government ready with first bailout for realty firm

Government ready with first bailout for realty firm
The Economic Times, February 15, 2009, Page 1

Neha Dewan & Shantanu Nandan Sharma, ET Bureau

Cash-strapped realty major Emaar MGF may turn out to be the first major beneficiary of a government package in the real estate sector,thanks to its partnership with Delhi Development Authority (DDA) for the 2010 Commonwealth Games village project in east Delhi. The government had already facilitated a nine-month deferment of its Rs 50-crore instalment to State Bank of India (SBI), and has now further asked DDA to prepare a report on buying out flats at a negotiated price, a government official told SundayET.

In fact, Emaar MGF could turn out to be the lone beneficiary in a downturn where all major real estate companies, including DLF and Unitech, are affected and witnessing a sharp erosion of their bottomlines. The government has so far refused to give any concession to the real estate sector and is asking for a price correction.

While talking to SundayET, urban development secretary M Ramanchandran said he had asked DDA to prepare a report on the issue and suggest possible solutions. “Emaar MGF has already got nine months extra to repay its Rs 50-crore instalment to SBI. We are assessing the situation. If the need arises DDA would either give them a loan or buy flats at a negotiated price. Also, PSUs may buy in bulk,” he said.

Apartments at Commonwealth Games Village were originally priced at Rs 12,500 per sq ft and today they range between Rs 12,750 and Rs 15,000 per sq ft. This means, prices of flats in the project, close to the Akshardham Temple in east Delhi, start at Rs 1.7 crore. Mr Ramachandran, however, said the government would not be able to pay the market price.

“Till January 31, the progress of the village is 40% against the targeted 41%. So, things are very much under control so far. But work can’t wait because of liquidity issues. So, flats have to be purchased, but it will have to be a justified price in case DDA buys those,” he added. When contacted, the Emaar spokesperson confirmed the rescheduling of the SBI loan repayment without furnishing any details. “We had availed ourselves of a loan from SBI in 2007. We will begin servicing this loan from September 2009,” the company spokesperson said.

The developer also confirmed that DDA, as a project partner, was discussing the appropriate funding options.