Real estate getting real
The Financial Express, May 29, 2009, Page 6
Anandita Singh Mankotia
The real estate sector made a killing during the boom period—some leading entrepreneurs even made it into the Fortune billionaires list. Now the big companies in the sector, troubled by the slowdown, are beginning to regret extending beyond their core competence. In the not so distant past, real estate companies in India were so confident about their own ability to make quick money that many began diversifying away from real estate to other sectors. For example, DLF felt that it was well poised to move into the retail business by partnering retailers—they called it a forward integration. DLF even bought into the wind energy business (going green being the new way forward to fuel our energy needs). They went into the hotels business, as they believed that it was only an extension of their realty business. After all, if they were competent enough to construct a hotel, they felt managing it wouldn’t be that difficult.
Funds were never really a problem during the boom. However, a year later, the realty players are in for a reality check. Almost all developers who unanimously clamoured for an infrastructure status to shore up their bottomlines seem to be now realising that their own plans and estimates were probably overly optimistic. DLF has said a strict no-no to any more retail tie-ups, its SEZ dream has gone sour, and the company posted the most dismal results ever in its history. Unitech believed, that having conquered the real estate business, it needed to look for greener pastures. Presumably inspired by big telecom deals like Hutchison-Vodafone, it felt it was well positioned to handle a foray into telecom. A year later, not only has it sold a majority stake in Unitech Wireless but has had to abandon its most hyped ‘luxury township’ project in favour of a more modest ‘affordable housing project’. It is even selling the corporate office that was supposed to act as its headquarters and house its staff. So, the big players are in a serious mess. The smaller ones are even worse off, actually facing an existential threat. Many bigger firms are resorting to sale of promoter stake in a last ditch attempt to salvage their floundering businesses.
The Financial Express, May 29, 2009, Page 6
Anandita Singh Mankotia
The real estate sector made a killing during the boom period—some leading entrepreneurs even made it into the Fortune billionaires list. Now the big companies in the sector, troubled by the slowdown, are beginning to regret extending beyond their core competence. In the not so distant past, real estate companies in India were so confident about their own ability to make quick money that many began diversifying away from real estate to other sectors. For example, DLF felt that it was well poised to move into the retail business by partnering retailers—they called it a forward integration. DLF even bought into the wind energy business (going green being the new way forward to fuel our energy needs). They went into the hotels business, as they believed that it was only an extension of their realty business. After all, if they were competent enough to construct a hotel, they felt managing it wouldn’t be that difficult.
Funds were never really a problem during the boom. However, a year later, the realty players are in for a reality check. Almost all developers who unanimously clamoured for an infrastructure status to shore up their bottomlines seem to be now realising that their own plans and estimates were probably overly optimistic. DLF has said a strict no-no to any more retail tie-ups, its SEZ dream has gone sour, and the company posted the most dismal results ever in its history. Unitech believed, that having conquered the real estate business, it needed to look for greener pastures. Presumably inspired by big telecom deals like Hutchison-Vodafone, it felt it was well positioned to handle a foray into telecom. A year later, not only has it sold a majority stake in Unitech Wireless but has had to abandon its most hyped ‘luxury township’ project in favour of a more modest ‘affordable housing project’. It is even selling the corporate office that was supposed to act as its headquarters and house its staff. So, the big players are in a serious mess. The smaller ones are even worse off, actually facing an existential threat. Many bigger firms are resorting to sale of promoter stake in a last ditch attempt to salvage their floundering businesses.
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