DLF offers price cuts for housing project delays

DLF offers price cuts for housing project delays
Business Standard, March 28, 2009, Page 6

JOE C MATHEW New Delhi

Realty giant DLF has offered some sweeteners for the buyers of its new housing project at Gurgaon. In a first-of-its-kind move, the company wrote to people who had booked flats at its New Town Heights residential project, where construction is yet to start, of an amendment to its sale agreement. The change entitles customers to benefits that will work out to a price reduction, it says, of about 20 per cent.

The company has announced a 5 per cent discount over the basic sale price. It has also announced another 10 per cent timely-payment rebate. The changes also include an increase in the compensation rates for delays from Rs 5 per sq ft per month to Rs 10.

It has also rescheduled the payment plan. Now, instalments have been linked to various construction milestones. All payments received over and above 35 per cent of the sale price will thus be treated as advance payment, and a rebate equivalent to 13 per cent interest will be allowed to the customer.

The company said the move was in tune with its earlier announcement to cut the prices of residential projects by 15-20 per cent.

“We have been implementing the price correction on a project to project basis.

Different models were worked out in cities like Chennai and Bangalore. In Hyderabad, reduced prices were announced. Each model reflects the price correction happening in specific cities,” Rajiv Talwar, group executive director, DLF said.

According to him, DLF’s attempt is to hold all existing clients, boost customer confidence and attract new customers, to ensure continued cash flow in the times of global recession. “We are trying to be responsive to the market,” he said.

Customers, however, said it wasn’t such agenerous thing. Commenting on the 10 per cent timely payment rebate, they said the rebate was on 65 per cent of the total amount, as 35 per cent was always paid as advance. “This means the rebate is effectively 6 per cent and not 10 as claimed by DLF. When the total benefit may not be more than 11 per cent, how can the company claim to offer 20 per cent discount?” they asked.

The project-specific and city-specific plans also came under criticism. However, the customers agreed that the DLF move was not a legal compulsion but a goodwill gesture.

The move has generated interest among other players also. Delhi-based property developer, Omaxe, said the company was working out a similar offer for its Greater Noida customers.

The move aims to hold existing customers, attract new ones and ensure continued cash flow in the times of global recession

Unitech reschedules, repays Rs 600-700-cr debt due by March

Unitech reschedules, repays Rs 600-700-cr debt due by March
The Hindu Business Line, March 28, 2009, Page 15

Liquidity position improves on good response for housing projects.

Moumita Bakshi Chatterjee, New Delhi

Real estate company Unitech Ltd has rescheduled and repaid about Rs 600-700 crore of debt, which was due by March 2009. The stock price of the company gained 33 per cent this week. It closed at Rs 35.90 on Friday.

However, there is no clarity on how much of the debt has been restructured and the proportion that has been repaid. While a questionnaire sent to the company spokesperson remained unanswered, a person in the know said the liquidity position of Unitech has improved on several counts — namely the sale of hotel property, funds received from Telenor deal, and an “encouraging” response for new affordable housing projects.

Money matters

Unitech recently sold its hotel in Gurgaon for Rs 235 crore, of which it has received 45 per cent of the payment; the balance 55 per cent will come in April. Besides this, with Telenor’s infusion of the first tranche of investment (of Rs 1,250 crore) into Unitech Wireless, nearly Rs 380 crore has come to Unitech Ltd’s coffers.

This is in lieu of advances Unitech Ltd extended to Unitech Wireless in the past. In addition, about Rs 2,000 crore telecom debt is now off Unitech; it got transferred from the erstwhile consolidated balance sheet of the Unitech Group to Unitech Wireless’ new balance sheet.

Settling counts

The balance debt on Unitech’s books now stands at Rs 8,000 crore, sources said. Unitech’s Managing Director, Mr Sanjay Chandra, had told reporters in January this year, that the company was able to repay or reschedule nearly three-fourths of Rs 2,500 crore loans then due by March 2009; at that point it needed to retire the balance (Rs 600-700 crore) debt. Sources said this Rs 600-700 crore debt has now been settled.

Sources said that in the first phase of the new affordable housing project in Gurgaon (priced at Rs 30-Rs 40 lakh) where the company had offered 150 apartments, the entire stock was sold-out within first 15 days. “The company then launched phase-II of the project and by now has sold 300 apartments (from phase-I and Phase-II). The project in Dadar, Mumbai has also been getting very good response,” sources said.

When contacted, a Mumbai-based analyst said the rally in share price may be in line with the broader markets. “I do not see any company-specific or sector-specific improvement. Even if they have been able to restructure their debt due by March 2009, that is on the expected lines post the completion of the Telenor deal,” the analyst said.

Another real estate analyst from a Mumbai-based brokerage firm pointed out that stock was “oversold and has got corrected now. No one expected the company to default on the loans, anyway.”

Parsvnath goes slow on hotel expansion

Parsvnath goes slow on hotel expansion
Sunday Business Standard, March 29, 2009, Page 3

To conserve cash, the firm is not buying new land for hotels and projects have been pushed back 12-18 months

BS REPORTER

New Delhi-based Parsvnath Developers is going slow on hotel expansion to conserve cash in the business, a top company official has said.

Parsvnath had planned to open 100 hotels in seven years with about 10,000 rooms. Now, the company is not buying any land for hotels apart from what it has for its 20 hotel projects, of which six are under way.

“We will not buy new land for now. We are focussing on six projects and will start the other 14 in due course of time,” said Parsvnath Chairman Pradeep Jain.

Most real estate developers, like DLF, Unitech and others, are scaling down or slowing hotel plans due to the current slowdown in the property sector and the cash crunch. While property prices have dropped as much as 50 per cent from their peak in 2008 in metros and sales have declined 70 per cent compared with last year, banks have tightened lending to property developers.

According to experts, 2030 per cent of the room capacity planned by 2010 would be deferred by at two to three years.

DLF, the country’s largest property developer, is said to be pushing back its hotel plans by 12-18 months due to the tough credit environment, while Unitech, another New Delhi-based developer, has sold its Gurgaon hotel to reduce its debt burden.

Even hotel chains are passing through a rough patch with occupancies falling 58 per cent in January 2009 and average room rates declining 14 per cent in the month.

Analysts expect Parsvnath’s balance sheet to be under pressure in the current quarter and the next financial year due to decline in execution, high receivables and overall slowdown in the property market.

The company’s consolidated third-quarter profit fell 95 per cent to Rs 5.42 crore and sales dropped 80 per cent to Rs 90.52 crore. In the fourth quarter, on a year-on-year basis, analysts expect revenues and net profit to drop further.

The company’s execution slowed in every quarter of the current financial year. The company has an executed space of 1.3 million sq ft in Q3 of FY09, compared with 2.2 million in Q2. Receivables from buyers went up to Rs 1,496 crore by the end of the December quarter, from Rs 1,346 crore in the September quarter.

“Developers cannot launch new projects when sales are slow and cash is hard to come by,” said an analyst with a Mumbai-based brokerage firm.

Parsvnath is developing six hotels in Mohali, Shirdi, Hyderabad, Lucknow, Ahmedabad, and expects to start the rollout by the second half of 2009. The company is in the process of getting approvals for 14 other projects, which are expected to start in the next 12 months.

Jain said the company was looking at diluting stakes in individual hotel projects and drop its earlier plan to dilute stake in the entire portfolio. “Today, there are no takers for consolidated assets. That is why we are looking at divesting stakes in individual projects,” said Jain.

DDA to lend Rs 100 crore to Emaar

DDA to lend Rs 100 crore to Emaar
The Economic Times, March 28, 2009, Page 15

Sanjeev Choudhary NEW DELHI

DELHI Development Authority (DDA) has agreed to lend Rs 100 crore to cashstrapped realty firm Emaar MGF to ensure the Commonwealth Games Village project is completed on time, a DDA official said.

But the development agency is willing to consider lending more later, he added. DDA would extend the Rs 100-crore loan if Emaar MGF offers apartments worth the same value either as collateral or for outright sale to the government-run body. The Village will have 1,168 apartments to accommodate 8,500 athletes likely to participate in the Commonwealth Games.

DDA has set up a committee to decide on the value of apartments in the village. The panel is expected to submit the valuation report in two weeks. Following this, DDA will decide if it wants to buy these apartments or give a loan using them as security.

It will be difficult for DDA to justify buying apartments at a steep price because it will have to sell them later. DDA is known to sell apartments at 30-40% discount to market rate.

Emaar MGF has been insisting DDA to buy apartments because the purchase can bring in some cash to the developer, whereas a loan will have to be repaid in a falling market.

A DDA spokesman said: “We are yet to take a final decision, but DDA will do all that is required to facilitate the timely completion of Commonwealth Games Village.”

Three months ago, Emaar MGF had requested DDA for a Rs 300-crore loan, saying it would not be able to meet the deadline of April 2010 due to a cash crunch.

Emaar MGF had bagged the project in 2007 after bidding Rs 321 crore for it. According to its contract with DDA, Emaar MGF can sell twothird of the total apartments. The balance will be handed over to DDA for free. The village, located on the bank of river Yamuna in east Delhi, is almost 45% complete.

A booming realty market, good location and high-quality features had encouraged Emaar MGF to price the project aggressively.

With a price tag ranging from Rs 1.8-4.8 crore, apartments in the athletes village are being offered by Emaar MGF for an average price of Rs 13,000 per sq ft.

But, a combination of global and local economic factors have badly impacted the property market and sent prices crashing. Buyers are staying away, waiting for a price cut similar to those in some projects belonging to country’s largest realty company DLF.

DLF will shortly launch a housing project in Delhi, around 7 km from Connaught Place, almost the same distance as Emaar MGF’s Village. But DLF’s project is likely to be priced at almost half Emaar’s rate.

Emaar MGF officials say the company will not lower prices to induce buying as the project is already competitively priced. Around 260 apartments have been sold so far and last four months have been very bad, they added.

NEW LIFE

Delhi Development Authority agrees to lend to ensure timely completion of the Commonwealth Games Village project
It may lend more if Emaar offers apartments worth the same value either as collateral or for outright sale
DDA has also set up a committee to decide on the value of apartments which is expected to submit the report in two weeks
Emaar MGF had earlier requested DDA for a Rs 300-crore loan, saying it would not be able to meet the April 2010 deadline due to a cash crunch

Demand-supply mismatch to dog cement industry amid capacity rise

Demand-supply mismatch to dog cement industry amid capacity rise
Business Standard, March 30, 2009, Page 8

Steel makers witness revival of demand

Steel makers witness revival of demand
Business Standard, March 30, 2009, Page 8

PRESS TRUST OF INDIA New Delhi

Steel makers, including the Steel Authority of India (SAIL), Tata Steel and JSW Steel, are witnessing a revival of demand following improved consumption from sectors such as construction and automobile.

“The steel sector is doing quite well now. There is an overall growth in demand. It is a positive sign,” JSW Steel ViceChairman and MD Sajjan Jindal said.

Steel companies saw the demand for the alloy waning due to the global industrial downturn in the second half of the current financial year. However, JSW Steel expects demand to improve by 4-5 per cent in the next fianancial year.

“This whole year, we will see aslight growth in demand, maybe by 4-5 per cent as consumption increases,” Jindal said.

Ruling out any changes in the price structure, Jindal said, “Domestic steel prices have already come down. We have already more or less bottomed out. Let’s not talk about pushing it further down,” he said.

Echoing the sentiments, other domestic producers such as Essar Steel and VISA Steel said they expect the improving trend to continue in the next financial year.

“Domestic demand is picking up. The offtake in February was better than in January. March will be better than February and the trend is expected to continue,” Essar Steel Business Group CEO J Mehra said, adding, howe ver, that the export market continues to be in bad shape.

Global steel majors such as ArcelorMittal and Posco have cut their output by up to 45 per cent due to the fall in demand. Steel prices have almost halved to $450 a tonne from highs of $1,150-1,250 a tonne seen last year. Following the trend, the Indian companies had also cut prices and output.

But the recent increase in demand has seen domestic steel mills embracing full capacity.

“Along with demand, capacity of steel mills in India are also growing in the past few months,” Visa Steel Chairman Vishambar Saran said.

The country’s steel behemoths — SAIL and Tata Steel —are witnessing a better demand for the commodity in the last quarter of the financial year than the previous quarter, mainly on improving demand in the construction sector.

Real Estate Intelligence Report, Friday, March 27, 2009

Upbeat Global Mood Lifts Market Past 10,000 Pts

Upbeat Global Mood Lifts Market Past 10,000 Pts
The Economic Times, March 27, 2009, Page 1

SENSEX ON ROAD TO REDEMPTION
TENTH PASS

GREEN SIGNALS: RECOVERY ROUND THE CORNER? The pall of gloom over the economy may just be lifting if the Sensex’s good run in recent days—on Thursday, it rose 335 points to breach 10k—and pickup in steel production are any indicators...

Our Bureau MUMBAI

THE Sensex closed above the psychological 10,000 mark on Thursday after more than two-and-a-half months, reviving fond memories of the boom days and hopes that equities may finally be on the recovery path. Brokers attributed the gains to frantic covering of short positions in the derivatives segment—Thursday being settlement day—and the upbeat mood in world markets.

While Indian stocks have gained nearly 23% since the worldwide rally in equities began early this month, market watchers are still unsure if the rally is indicative of an impending economic recovery. Since March 9, the Sensex has gained 1,842 points, with five stocks—Reliance Industries, Infosys Technologies, ICICI Bank, HDFC and HDFC Bank—accounting for over 53% of those gains. Reliance alone made up for 25% of the rise, as the market is expecting some announcement relating to production of gas from its KG Basin blocks shortly.

The Sensex closed at 10,003.10, up 335.20 points, or 3.5%, over its previous close while the 50-share Nifty closed at 3082.25, up 97.90 points, or 3.3%. According to BSE provisional data, foreign funds net bought shares worth around Rs 1,300 crore, easily offsetting the net sales worth Rs 462 crore by local institutions.

“Even after the recent run-up, shares are not significantly expensive,” says Bajaj Allianz Life Insurance CIO Sashi Krishnan.

RBI guv sees swifter recovery

RBI guv sees swifter recovery
The Economic Times, March 27, 2009, Page 16

Our Bureau NEW DELHI

RESERVE Bank of India (RBI) governor D Subbarao on Thursday said that the next fiscal (2008-09) will be more challenging than the present fiscal in terms of maintaining a positive growth momentum.

He, however, added that India’s turnaround would be steeper and swifter once there is a turnaround in global economy.

“We believe that growth moderation might be steeper than we had thought earlier. I believe 2009-10 is going to be a more challenging year than 2008-09,” Mr Subbarao said at a conference organised by Confederation of Indian Industry (CII).

Growth in present fiscal was sustained because of development of the brownfield projects (projects which were up for expansion) while most of the industrial houses put the greenfield (new) projects on hold. This may have an impact on the world’s economy in the month’s to come, the RBI chief said.

On the possibility of deflation in Indian economy Mr Subbarao ruled out any possibility of a sustained deflation. He said that inflationary tendencies are likely to be healthy in the coming days.

“Consumer Price Index (CPI) is still elevated. There are four indices of CPI. Some of them are still in double digits. Our own view is that there is no fear of sustained deflation in India,” he said. On the need of a further stimulus package Mr Subbarao said that there is a need that the policy-makers and government should first allow the first two packages to percolate completely.

“There is a cost to support further stimulus, there will be pressure on the credit market. I personally think we should give them (earlier packages) time to run for the moment,” he said.

Revival process may start soon: Tendulkar

Revival process may start soon: Tendulkar
The Economic Times, March 27, 2009, Page 16

Even as the Sensex pierced the 10K barrier on Thursday after months of economic gloom, Prime Minister’s Economic Advisory Council chairman Suresh Tendulkar spread cheer by forecasting that the economy might be on a recovery path by September 2009, reports Our Bureau from Kolkata. Speaking at a seminar organised by Merchant Chamber of Commerce on Thursday, he said: “I am reasonably hopeful that the low interest rate regime will come as a relief and with that I expect the revival process to start in the next 3-6 months.”

OPTIMISTIC: D Subbarao