Time to ‘right-size the projects’
The Economic Times, February 05, 2009, Page 19
SIMILARLY, Emaar MGF, a joint venture between Dubai’s Emmar Properties and India’s MGF, is a seeking a DDA loan to complete building the Commonwealth Games Village in Delhi before the 2010 Games. The company had previously won the DDA bid to build the village. The problems being faced by builders are not limited to Delhi and its surrounding areas. DLF has requested the West Bengal government to reduce the size of a deal to develop a 5000-acre township at Dankuni. The company has so far paid only 10% of the total bid amount of Rs 2,713 crore, and had asked government to allot proportional land only. The government has been unable to acquire much land for the proposed Rs 33,000-crore project and DLF, faced with a liquidity crunch, too is not keen to pursue it.
Two months ago, the company, refusing to make the full payment for a 75-acre project in Kokapet, had asked Andhra Pradesh government to adjust the due amount from the payment it had made for another project in the state. Some of the most expensive land deals were struck in Mumbai’s Bandra-Kurla complex in the past two years. But the successful bidder—Jet Airways—which offered Rs 826 crore for the 1.5-acre BKC plot, and Sunteck that won the Rs 496-crore bid, are now finding it impossible to pay.
“It’s sensible for the governments to understand the current market situation and let developers right-size the projects,” says CBRE South Asia MD Anshuman Magazine, who says developers will be able to focus on construction only after the burden of huge land payments is off their backs. In a sign of the changing market, land is no more the priority of developers as is evident in recent land auctions by regional development authorities in Mumbai or the national cpital region (NCR). “Developers, who ordinarily buy land, have turned into sellers. And there are many big names looking to sell land parcels. But in the last six months, we haven’t done any land deal of reasonable size, precisely because no one wants to buy land today,” says Knight Frank India chairman Pranay Vakil.
The real estate sector is in a slump as demand has dramatically shrunk and credit is still unavailable to developers. Almost all real estate firms have reported a massive decline in profits and revenues. DLF reported a decline of 69% in profit while Unitech’s profit fell 74%. Smaller players such as Parsvnath and Omaxe fared even worse with a 95% decline in profit.
The Economic Times, February 05, 2009, Page 19
SIMILARLY, Emaar MGF, a joint venture between Dubai’s Emmar Properties and India’s MGF, is a seeking a DDA loan to complete building the Commonwealth Games Village in Delhi before the 2010 Games. The company had previously won the DDA bid to build the village. The problems being faced by builders are not limited to Delhi and its surrounding areas. DLF has requested the West Bengal government to reduce the size of a deal to develop a 5000-acre township at Dankuni. The company has so far paid only 10% of the total bid amount of Rs 2,713 crore, and had asked government to allot proportional land only. The government has been unable to acquire much land for the proposed Rs 33,000-crore project and DLF, faced with a liquidity crunch, too is not keen to pursue it.
Two months ago, the company, refusing to make the full payment for a 75-acre project in Kokapet, had asked Andhra Pradesh government to adjust the due amount from the payment it had made for another project in the state. Some of the most expensive land deals were struck in Mumbai’s Bandra-Kurla complex in the past two years. But the successful bidder—Jet Airways—which offered Rs 826 crore for the 1.5-acre BKC plot, and Sunteck that won the Rs 496-crore bid, are now finding it impossible to pay.
“It’s sensible for the governments to understand the current market situation and let developers right-size the projects,” says CBRE South Asia MD Anshuman Magazine, who says developers will be able to focus on construction only after the burden of huge land payments is off their backs. In a sign of the changing market, land is no more the priority of developers as is evident in recent land auctions by regional development authorities in Mumbai or the national cpital region (NCR). “Developers, who ordinarily buy land, have turned into sellers. And there are many big names looking to sell land parcels. But in the last six months, we haven’t done any land deal of reasonable size, precisely because no one wants to buy land today,” says Knight Frank India chairman Pranay Vakil.
The real estate sector is in a slump as demand has dramatically shrunk and credit is still unavailable to developers. Almost all real estate firms have reported a massive decline in profits and revenues. DLF reported a decline of 69% in profit while Unitech’s profit fell 74%. Smaller players such as Parsvnath and Omaxe fared even worse with a 95% decline in profit.
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