Few takers for realty projects on the block
The Economic Times, April 21, 2009, page 6
Neha Dewan & Raja Awasthi, ET Bureau, NEW DELHI
The cash strapped real estate sector is desperately seeking funds to script a revival. And what could be a better way out for the companies than to put their assets on the block. Buyers, however, are still not coming forward. SundayET’s findings reveal that an estimated Rs 4,500 cr to Rs 5,000 cr worth upcoming projects by leading developers around the country are on the block - but takers are very few. Industry sources say that while top names in the business have been able to sell off some assets, a lot more of those still need to be offloaded.
People close to deals say that while there were a large number of developers entering the special economic zones (SEZ) segment during the boom time, now there is almost a reverse wave to get out. Says Rajeev Talwar executive director, DLF Group, “The market over the last six to eight months have witnessed a major slowdown as far as the cash flow is concerned. This has resulted in many developers trying to raise cash by putting few of the assets on the block. What will sell in these conditions are projects which are priced attractively as there is some room for the buyer.” DLF, India’s largest real estate developer, has requested the ministry of commerce & industry for de-notification of four of its nine SEZs for IT and IT-enabled service projects.
A look at the projects on the block says it all. Real estate major Unitech, for instance, has put its Marriott Service Apartments in Gurgaon up for sale. The developer is in talks with some companies for the project, which stands at an estimated cost of Rs 250 cr. Ditto is the case with DLF which is looking at selling 8 of its hotel plots over the next three months at an estimated cost of Rs 900 crore. The group is also considering pulling out of the Rs 1,000 crore infopark project which was being developed over 54 acres., The case with Parsvnath is no different. The developer is in talks with companies to sell off its four hotel projects in Hyderabad, Goa, Ahmedabad and Lucknow. And Omaxe too is looking for a buyer for its Omaxe Citadel project in Jasola which is worth roughly around Rs 90 to Rs 100 cr.
However, many of these projects are not attracting buyers. So is it a case of high valuation that is acting as a dampener? Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj, says that there was fundamentally a valuation problem in the first leg of resale during Q4 in 2008. But that has changed in the first quarter of 2009. “Markets fell considerably in Q1 ‘09. That sent shock waves globally which, in turn, impacted valuations and brought them down. But that still hasn’t happened across the board. Hence, valuations in some cases are still high,” he says. Dutt says that more transactions are expected over the next few months. “Those developers who have aligned to market rates are seeing sales. Those who were adamant about high valuations will be forced to sell on revised value transactions. The next 3-6 months are expected to see more transactions taking place.”
The Economic Times, April 21, 2009, page 6
Neha Dewan & Raja Awasthi, ET Bureau, NEW DELHI
The cash strapped real estate sector is desperately seeking funds to script a revival. And what could be a better way out for the companies than to put their assets on the block. Buyers, however, are still not coming forward. SundayET’s findings reveal that an estimated Rs 4,500 cr to Rs 5,000 cr worth upcoming projects by leading developers around the country are on the block - but takers are very few. Industry sources say that while top names in the business have been able to sell off some assets, a lot more of those still need to be offloaded.
People close to deals say that while there were a large number of developers entering the special economic zones (SEZ) segment during the boom time, now there is almost a reverse wave to get out. Says Rajeev Talwar executive director, DLF Group, “The market over the last six to eight months have witnessed a major slowdown as far as the cash flow is concerned. This has resulted in many developers trying to raise cash by putting few of the assets on the block. What will sell in these conditions are projects which are priced attractively as there is some room for the buyer.” DLF, India’s largest real estate developer, has requested the ministry of commerce & industry for de-notification of four of its nine SEZs for IT and IT-enabled service projects.
A look at the projects on the block says it all. Real estate major Unitech, for instance, has put its Marriott Service Apartments in Gurgaon up for sale. The developer is in talks with some companies for the project, which stands at an estimated cost of Rs 250 cr. Ditto is the case with DLF which is looking at selling 8 of its hotel plots over the next three months at an estimated cost of Rs 900 crore. The group is also considering pulling out of the Rs 1,000 crore infopark project which was being developed over 54 acres., The case with Parsvnath is no different. The developer is in talks with companies to sell off its four hotel projects in Hyderabad, Goa, Ahmedabad and Lucknow. And Omaxe too is looking for a buyer for its Omaxe Citadel project in Jasola which is worth roughly around Rs 90 to Rs 100 cr.
However, many of these projects are not attracting buyers. So is it a case of high valuation that is acting as a dampener? Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj, says that there was fundamentally a valuation problem in the first leg of resale during Q4 in 2008. But that has changed in the first quarter of 2009. “Markets fell considerably in Q1 ‘09. That sent shock waves globally which, in turn, impacted valuations and brought them down. But that still hasn’t happened across the board. Hence, valuations in some cases are still high,” he says. Dutt says that more transactions are expected over the next few months. “Those developers who have aligned to market rates are seeing sales. Those who were adamant about high valuations will be forced to sell on revised value transactions. The next 3-6 months are expected to see more transactions taking place.”
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1 comment:
Seems to me that the real estate developers are blooming in the metro cities in India, thus I'm surprised buyers are not attracted to these projects, they surely are a good investment considering the market will restore to its original (if not better) state very soon.
Take care, Elli
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