Builders scale down projects amid cash crunch

HT Estates - - HTESTATES - Bidya Sa­pam bidya.s@htlive.com Mad­hurima Nandy in Ben­galuru con­trib­uted to this story.

Squeezed­by­im­pa­tientlen­der­son one­side an­dan­grycus­tomer­son the other, many prop­erty de­vel­op­ers are shrink­ing their busi­nesses or plan­ning to exit al­to­gether. Some of them have avoided new launches for years, fo­cus­ing in­stead on com­plet­ing on­go­ing­pro­jects, sell­ing lan­dand find­ing part­ners for de­vel­op­ment.

The rea­sons: a crip­pling cash crunch and heavy debt in a mar­ket that has flat­lined in the past four-to-five years, be­sidesatough real es­tate law.

Ku­mar Ur­ban De­vel­op­ment Ltd(KUL), one­ofthe­biggest land own­ersinPune, has­not­launched a project in three years, a per­son in the know­said, ask­ing not to be iden­ti­fied. Ac­cord­ing to two oth­ers, it re­cently sold 300 acres at Hin­je­w­a­diandMan­jar­iKhur­dto VTP Group— an­other lo­cal builder—andin­sti­tu­tional in­vestors. The­land­saleis­partofKUL’s strat­egy to re­pay debt.

Lalit Jain, chair­manand­manag­ing di­rec­tor, KUL, de­clined to com­ment on the land sale, but said, “We­have­been­try­ing­tosell a few of our as­sets. We are debt­free now. We will come up with ournextgrowth­plan,” Jain said, with­out elab­o­rat­ing. A VTP spokesper­son de­clined to com­ment.

The­fa­te­of­some­ofIn­dia’slarg- est de­vel­op­ers such as Unitech Ltd, Am­ra­pal­iGroupandJaypee In­frat­ech re­main un­cer­tain ow­ing­toin­sol­ven­cypro­ceed­ings, with­manypro­mot­ersin­po­liceor ju­di­cial cus­tody and stalled projects.

Many land ag­gre­ga­tors who had turned builders when the go­ing was good are giv­ing up de­vel­op­ment­tore­duc­erisks. One of them is Mum­bai-based Ro­han Lifescapes.

“We used to de­velop on our own. Wearenow­fo­cused­moreon landag­gre­ga­tion. Wewil­lpur­sue a de­vel­op­ment model with other builders. Wearein­con­ver­sa­tion with­anum­berof­realestate­firms for part­ner­ship,” chair­man and man­ag­ingdi­rec­torHareshMe­hta said. He said 80-90% de­vel­op­ers will fi­nally exit, given­the­mar­ket slow­dow­nand­be­cause­ofthe­new real es­tate law.

Ro­han Lifescapes has not launchedanypro­ject­int­woyears an­dis chalk­ing out anew­growth plan. It will no longer de­velop projects but­stayaslandag­gre­ga­tors, part­ner­ing other builders to de­velop plots.

“The fre­quent changes in pol­icy and reg­u­la­tions is af­fect­ing ev­ery­one. Cash flow is an is­sue for most now. Ear­lier, projects used to get sold once launched. Now, un­til the project is 60-70% ready, no sales are hap­pen­ing,” Me­hta said.

Strate­gic and­se­ri­ous builders are here to stay, said prop­erty and is want­ing to exit in­vest­mentsinHy­der­abadandNag­pur, a con­sul­tant said on con­di­tion of anonymity.

Penin­sula land de­clined to com­ment on the mat­ter.

“Builders are now fo­cused on their strength. There­are­de­vel­op­ers who are good in ex­e­cu­tion or con­struc­tion and those, whose strength is ag­gre­gat­ing land,” said RamYa­dav, CEO, Edel­weiss Real Es­tate Ad­vi­sory Prac­tice.

How­ever, the prob­lem with some land ag­gre­ga­tors is that they have ac­quired land beyond their ca­pac­ity to de­velop them and are stuck with it, he said.

“NIIF’s in­vest­ment in HCARE 2 demon­strates the role that NIIF’s Fund of Funds can play in the in­fra­struc­ture and as­so­ci­ated sec­tors in In­dia by an­chor­ing and­in­vest­ing with fund man­agers with strong track records,” NIIF said.

HCARE 2 is struc­tured as a Cat­e­gory II Al­ter­na­tive In­vest­ment Fund with a cor­pus of ₹4,290 crore. The fund pro­vides mez­za­nine fi­nance to de­vel­op­ers of mid-in­come and af­ford­able ur­ban hous­ing projects.

“Hous­ing re­mains a crit­i­cal need in In­dia and the de­mand for hous­ing is ex­pected to grow sub­stan­tially with in­creased ur­ban­iza­tion. This de­mand, in con­junc­tion with re­forms im­ple­mented in the sec­tor cre­ates an at­trac­tive in­vest­ment op­por­tu­nity for dis­ci­plined de­vel­op­ers and

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