2009: Realty companies found friends in bankers
Business Standard, December 27, 2009, Page 3
Press Trust Of India / New Delhi
Wiser from last year’s free fall, realty companies discovered a new mantra in ‘affordable housing’ and found help from banks that offered low-interest home loans to build their businesses in 2009.
Prices continued to fall by 25-30 per cent even this year and the virtual shutdown in the property market, which began in late 2008, forced cash-starved realty firms to go for distress sale of assets and shares to repay their mounting debts.
Yet, the appetite to raise funds was so high that as soon as the stock market bounced back to a reasonable level, about 10 realty firms announced their plans to launch initial public offer (IPO) to raise over Rs 12,000 crore together.
“Property prices fell by 25-30 per cent in all the three segments (homes, offices and retail) compared to last year,” global property consultant Jones Lang LaSalle Meghraj Chairman and Country Head Anuj Puri said.
The market reality caught up with the realtors, including the country’s top two realty firms — DLF and Unitech — and their strategy of concentrating only on luxury and high-end housing projects was proved to be wrong.
“Our focus will be on the mid-income homes and commercial complexes, with deferment of high-margin launches in luxury homes and retail space,” DLF Vice-Chairman Rajiv Singh had said in January.
Unitech Managing Director Sanjay Chandra also conceded that “we made a mistake of only focusing on top 2-3 per cent of India’s population. Now we want to reach the masses... enter into budget and affordable houses”.
Even the Centre was keen on incentivising low-cost housing, which is evident from the fact that public sector banks were asked to lower the interest rates for home loans up to Rs 20 lakh as part of a stimulus measure to revive the economy, reeling under global meltdown.
Private banks, too, made their entry and towards the second half of the year the home loan market was buzzing with activity, with the race to provide low interest loans getting hotter and rates coming down to as low as 8 per cent.
While Unitech announced it wanted to become numero uno in the housing category with plans to construct 20,000 affordable houses in two years, DLF also threw its hat into the ring of low-cost housing by planning to build 100,000 units at a price below Rs 20 lakh in major cities across the country.
Other developers, too, were not lagging behind. Soon, the property market was flooded with affordable housing projects starting from as low as Rs 4 lakh from Tatas. Lower margins and cut in sizes of apartments helped developers in offering the flats at an affordable rates.
Even as they found a way out to revive housing demand, developers had no option but to wait and watch for commercial segment (office and retail space). With companies holding their expansion plans, office space absorption fell by 29 per cent this year.
With demand continuing to be sluggish, debt-ridden realty companies had to look for other avenues to improve their cash flows as pressure from mounting debts rose.
Developers resorted to selling of shares and assets, besides approaching banks for restructuring of their loans.
Unitech set the trend by raising about Rs 4,400 crore in two rounds through private placement of shares (QIP), besides selling office building in South Delhi for Rs 500 crore.
DLF promoters, too, sold nearly 10 per cent stake in the company to raise Rs 3,860 crore. The company also decided to sell its non-core businesses like wind energy. IndiaBulls, Parsvnath and HDIL were among other companies that raised money via QIP route.
Those who could not raise funds had to back out from projects, like BPTP. The Delhi-based firm had to partly surrender the largest-ever land deal in the country, valued at Rs 5,006 crore. after failing to make payments.
Towards the second half of the year, with the country's economic situation seeing recovery, the real estate market also saw glimpses of hope. Demands trickled in and, with a buoyant stock market, realtors sensed the opportunity to tap the capital markets.
Major realty companies, including Emaar MGF and Sahara, filed prospectuses with Sebi for their IPO to raise collectively over Rs 12,000 crore. Godrej Properties raised Rs 500 crore from its IPO. “As we step out from 2009, we see confidence, stability and improvement in demand,” Puri of JLLM said, but cautioned that prices should remain reasonable.
Business Standard, December 27, 2009, Page 3
Press Trust Of India / New Delhi
Wiser from last year’s free fall, realty companies discovered a new mantra in ‘affordable housing’ and found help from banks that offered low-interest home loans to build their businesses in 2009.
Prices continued to fall by 25-30 per cent even this year and the virtual shutdown in the property market, which began in late 2008, forced cash-starved realty firms to go for distress sale of assets and shares to repay their mounting debts.
Yet, the appetite to raise funds was so high that as soon as the stock market bounced back to a reasonable level, about 10 realty firms announced their plans to launch initial public offer (IPO) to raise over Rs 12,000 crore together.
“Property prices fell by 25-30 per cent in all the three segments (homes, offices and retail) compared to last year,” global property consultant Jones Lang LaSalle Meghraj Chairman and Country Head Anuj Puri said.
The market reality caught up with the realtors, including the country’s top two realty firms — DLF and Unitech — and their strategy of concentrating only on luxury and high-end housing projects was proved to be wrong.
“Our focus will be on the mid-income homes and commercial complexes, with deferment of high-margin launches in luxury homes and retail space,” DLF Vice-Chairman Rajiv Singh had said in January.
Unitech Managing Director Sanjay Chandra also conceded that “we made a mistake of only focusing on top 2-3 per cent of India’s population. Now we want to reach the masses... enter into budget and affordable houses”.
Even the Centre was keen on incentivising low-cost housing, which is evident from the fact that public sector banks were asked to lower the interest rates for home loans up to Rs 20 lakh as part of a stimulus measure to revive the economy, reeling under global meltdown.
Private banks, too, made their entry and towards the second half of the year the home loan market was buzzing with activity, with the race to provide low interest loans getting hotter and rates coming down to as low as 8 per cent.
While Unitech announced it wanted to become numero uno in the housing category with plans to construct 20,000 affordable houses in two years, DLF also threw its hat into the ring of low-cost housing by planning to build 100,000 units at a price below Rs 20 lakh in major cities across the country.
Other developers, too, were not lagging behind. Soon, the property market was flooded with affordable housing projects starting from as low as Rs 4 lakh from Tatas. Lower margins and cut in sizes of apartments helped developers in offering the flats at an affordable rates.
Even as they found a way out to revive housing demand, developers had no option but to wait and watch for commercial segment (office and retail space). With companies holding their expansion plans, office space absorption fell by 29 per cent this year.
With demand continuing to be sluggish, debt-ridden realty companies had to look for other avenues to improve their cash flows as pressure from mounting debts rose.
Developers resorted to selling of shares and assets, besides approaching banks for restructuring of their loans.
Unitech set the trend by raising about Rs 4,400 crore in two rounds through private placement of shares (QIP), besides selling office building in South Delhi for Rs 500 crore.
DLF promoters, too, sold nearly 10 per cent stake in the company to raise Rs 3,860 crore. The company also decided to sell its non-core businesses like wind energy. IndiaBulls, Parsvnath and HDIL were among other companies that raised money via QIP route.
Those who could not raise funds had to back out from projects, like BPTP. The Delhi-based firm had to partly surrender the largest-ever land deal in the country, valued at Rs 5,006 crore. after failing to make payments.
Towards the second half of the year, with the country's economic situation seeing recovery, the real estate market also saw glimpses of hope. Demands trickled in and, with a buoyant stock market, realtors sensed the opportunity to tap the capital markets.
Major realty companies, including Emaar MGF and Sahara, filed prospectuses with Sebi for their IPO to raise collectively over Rs 12,000 crore. Godrej Properties raised Rs 500 crore from its IPO. “As we step out from 2009, we see confidence, stability and improvement in demand,” Puri of JLLM said, but cautioned that prices should remain reasonable.
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