<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Burdened: Some Delhi builders are unable to service their debt repayments (Pic By Tribhuwan Sharma)
Some Delhi-based builders have been seriously hit by the current financial crisis. They were caught with over-extended positions when liquidity and demand suddenly dried up. Many of them had bought land at peak price points and are now not able to service their instalments or debt payments.
Parsvnath Developers, for instance, had bought 123 acres of land from the Chandigarh Housing Board in November 2006 for Rs 821 crore. Parsvnath also agreed to part with 30 per cent of the revenue accruing from the project to the housing board, taking the cost to Rs 1,400 crore. A deal that looked attractive in 2006 is now unviable. Much of the Rs 1,000-crore IPO proceeds have also been stuck in the project.
Unitech acquired 340 acres of Noida land for Rs 1,583 crore. Hailed as the biggest land deal in 2006, it is today unable to service its debt repayment schedule. Unitech, forced to put its office headquarters in Saket in Delhi up for sale, is hoping to raise Rs 500 crore in proceeds.
Parsvnath officials, on condition of anonymity, have told BW that salaries have not been paid to Mumbai staffers since August, and that of its pre-crisis employee strength of 650, only 400 have been retained. A detailed questionnaire emailed to Parsvnath Chairman Pradeep Jain and Unitech Managing Director Sanjay Chandra failed to elicit any reply.
In comparison, some Mumbai builders such as C.L. Raheja Group and the Hiranandanis are better positioned to withstand the crisis because of their conservative approach of not bidding high for land and bringing supply into the market in driblets in consonance to demand.
The end of the era of acquiring expensive land banks was illustrated by the failure of the auction of the 10.4-acre Finlay Mills by the National Textile Corporation. There were only four bidders for the central Mumbai property, and compared to the base price of over Rs 1,000 crore, the highest bid by DB Realty was just Rs 405 crore. In contrast, the sale of a two-acre plot near Bandra Kurla Complex by Gujarat Ambuja to Orbit Corp fetched Rs 333 crore in March 2007.
gurbir.singh@abp.in
(Businessworld Issue 30 Dec 08-05 Jan 09)