MUMBAI: With credit repayment dates nearing and banks refusing to refinance their loans, real estate developers are left with no choice but to defer their project launches for the next two quarters. Pankaj Renjhen, managing director (Mumbai) at international real estate consultant Jones Lang La Salle Meghraj, said the industry is stagnant at the moment. "There will be no new launches till the first quarter of the next fiscal. Right now, developers immediate goal is to find buyers and make sales," he said.
Sobha Developers Ltd, the Bangalore-based realtor, is one of the most leveraged players in the sector and its debts have increased three-folds over last year. The company has now decided to cancel most of its project launches. Last quarter, Sobha deferred the launch of its Kochi project. A senior official from Sobha, on condition of anonymity, said the company would delay new launches for the "next two quarters".
According to a October 31 report by Chirag Negandhi and Nitin Idnani of Enam Securities, Sobha has also reduced its land bank by 697 acre in the last quarter by exiting some joint ventures and agreements with landowners in Bangalore.
DLF, the countrys largest realtor by market capitalisation, has also deferred its project launches, chairman KP Singh said recently. However, a company spokesperson said DLF would announce two mid-income housing projects in December but steer clear of hospitality and commercial projects. The spokesperson added, "The projects for which we havent got approvals or those that are delayed have been cancelled as of now. But projects where we have started construction wont be deferred."
Private equity (PE) players too are playing safe, refusing to enter the market for the next six months, Renjhen said. He added that about $2.5-3 billion PE investment that was expected to enter the market has now been postponed. So developers are forced to complete their under-construction projects rather than announce new ones.
Parsvnath Developers, a north-based realtor, is working on completing announced projects. A company spokesperson said, "We have launched five residential projects in September and we will focus on completing them. No new projects have been planned."
But Unitech, the second largest realtor by market capitalisation and a premium segment player, is now shifting focus to the mid-income arena in the National Capital Region (NCR), Gurgaon, Greater Noida, Kolkata and Chennai. A company official said, "We are focusing on affordable housing projects, which will be launched after a few months in five cities."
A Mumbai-based analyst with a foreign brokerage, on condition of anonymity, said, "Most of the developers whose debts have doubled will execute existing projects and try to cash them to repay loans. Those who arent under the stress of loan repayments wont touch any new projects."
Another analyst with domestic brokerage added, "Any mid-cap developer who has leveraged its equity to debt ratio by 1 is facing problems raising capital. Its better they enter when money is available at low interest rates."
