Red Fort to pick 18% in Parsvnath’s Delhi project

Red Fort to pick 18% in Parsvnath’s Delhi project
The Economic Times, June 12, 2009, Page 4

Our Bureau NEW DELHI

REAL estate-focused private equity firm Red Fort Capital is picking up 18% stake in Parsvnath Developers’ much-delayed premium residential project in Civil Lines, Delhi, for Rs 90 crore, a release issued by the property developer said Thursday.

The project—Parsvnath La Tropicana—has a total of 453 apartments in 3, 4 and 5-bedroom categories, priced between Rs 2.5 crore and Rs 5 crore at a rate of Rs 10,000 per sqft.

The prices being offered by Parsvnath look quite steep given the price erosion in the property market over the last one year. Country’s largest real estate developer DLF launched a housing project in April in Delhi at around half the rate. Projects of both DLF and Parsvnath are almost equidistant from the central business district Connaught Place in central Delhi.

Parsvnath claims to have sold around 60% of the apartments in the project so far, but has not yet started construction since its launch three years ago because of the delay in obtaining government clearances.

The company said it will shortly start construction work as it has now received all requisite approvals from the government agencies. Parsvnath expects the project to be completed in three years and generate total revenue of Rs 1,300 crore.

Real estate players have been facing a major cash crunch after home sales diminished due to galloping property prices and the cost of borrowings. At the same time, banks cut credit supply to the sector and other investors such as private equity funds avoided further exposure.

Many realty firms have started launching low-priced or ‘affordable’ homes to stimulate demand. Several private equity players too have shown interest in investing in such projects, but Red Fort’s investment in Parsvnath’s premium housing project comes as a surprise. The deal, however, is an indicator that private equity firms are slowly returning to the sector.