Builders scale down projects amid cash crunch
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