debt consolidation mumbai
Realty Dreams of Small, medium-sized Cos Crumble
MUMBAI: Faced with a slowdown in several segments, the market for Indian goods moves towards the next phase of consolidation. Liquidity crisis in the housing market is beginning to drive many medium and small developers scrounge for shelter.
Many want to liquidate their land and incomplete projects by selling them to larger developers or private players equity, even at lower prices. What's forcing them to take this step is a stagnant market, with ownership rates during major correction in some cities. Around 15 deals in the real estate sector have fallen through the last two months with investors developing a cold feet, according to industry officials.
Consider some cases. A mid-sized manufacturer in Chembur in Mumbai has put its 14-floor building in the commercial center of Mumbai on the block. The developer wants to raise around Rs 150 crore which would help realize his plan ahead.
A Hyderabad-based real estate group started advertising to attract investors to generate Networth Rs 50 crore against bulk purchasing of its housing project in the city. A small developer in Mumbai, pushed into a corner, because of mounting debts for building materials, is now offering its project Juhu-Versova in Mumbai about 35% reduction on the current market price. In Delhi, some developers have approached property consultant to sell their commercial properties generate income to finance some projects unfinished.
Real estate funds and established developers admit that they are working on various proposals. "Even in normal circumstances we used to get offers from mid-size developers to redeem their projects. But now the figures have increased considerably, "said Hiraandani Developers chairman Niranjan Hiranandani.
The Bangalore-based developer Nitesh Estates said it has received similar proposals, mainly from markets like Pune, Nagpur and Bangalore. "Every two days we received a proposal to gather interest in the project or to buy the full. We have not concluded such an agreement until this, "said Nitesh Estates chairman Nitesh Shetty. Industry observers said that the commercial property market, stagnant recent months, showing signs of cracking, especially in suburban Mumbai and many tier II & III cities. The volume of sales of commercial properties dropped 30% over the last two months in the wake of interest rates rising.
"Developers, especially small developers, are under pressure now. Flow of funds in this sector has begun to dry up. The sale of incomplete projects to big developers or private equity firms is a options explored by many such developers, "said a senior KnightFrank India, a property consultant. Thank Tigher standards of fundraising and developers a weak stock market many countries hit the DDOR private investors who are driving the deals Assessment and hard. Even on a reduced valuation, PE firms are various clauses to safeguard their money.
Last May, the Ministry of Finance said that all external funds raised by Indian companies through partially convertible, and possibly non-convertible preference shares convertible, are treated as debt and would be subject to guidelines for external commercial borrowings (ECBs).
This made it difficult for developers access to foreign funds, since ECBs are allowed only in major building projects and the conditions are much stricter than FDI. "Developers are willing to compromise on valuations. The risk-adjusted returns have increased by 20-25% during the recent months, "said Starwood Capital India Balaji Rao
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