Big real estate developers are resorting to desperate measures like
selling their land banks, half finished projects and other non-core
assets to reduce the burgeoning debt burden. The reason for the debt
burden is high interest rates, drying up of cash flow from banks and
slowing sales volume, according to a India Today report.
According to industry estimates, all top 11 listed real estate developers started the year with a net debt of Rs.41,700 crore, which was 14 per cent more than the year ago.
"This is a difficult situation for developers. The debt burden is huge and they have to pay huge amount as interest rate every quarter. If the situation does not improve, they may have to put some of their large portfolio projects for sale," Amit Goenka, national director (capital transactions) Knight Franks India, said.
The country's largest developer DLF Limited accounts for more than half of the debt burden of these listed companies. According to the company's financial report as of December 31, 2011, it had a debt of Rs.22,725 crore. In 2011-12 fiscal, DLF's net profit fell by 27 per cent to Rs.1,200.82 crore from Rs.1,639.61 crore in the previous year. The company paid Rs.603.89 crore as interest in last quarter alone.
Despite asset sales, DLF was able to decrease its debt by only Rs.33 crore. The company has a mandatory debt repayment of Rs.3,900 crore within this fiscal. "Our main focus is to reduce debt by selling noncore assets. The company will focus more on selling non-core assets and is targeting to raise Rs.5,000 crore-Rs.6,000 crore," Rajiv Singh, vicechairman, DLF, said after announcing its financial results.
Even Unitech is resorting to asset sales. According to industry sources, the company is planning to sell some of its noncore assets like IT park and SEZs to pay off debt. The company's last reported debt stood at Rs.5,190 crore. HDIL, another large developer, had a debt of Rs.4,100 crore as of December 31, 2011. It recently sold a two-acre plot at Andheri, Mumbai, to the real estate arm of Adani Enterprises for Rs.900 crore.
Another National Capital Region-based real estate giant Parsvnath Developers is selling land banks, including its prime property on Kasturba Gandhi Marg. The firm has recorded a debt amount of Rs.1,250 crore. The company also has plans to sell non-core assets in Kochi and Chennai.
Others like Sobha Developers have already managed to reduce their debt. It has sold many of its non-core assets and managed to reduced its debt to Rs.1,183 crore as on 31 March from Rs.1,800 crore.
The situation is set to become worse as land banks have already started shrinking. For example, DLF's land bank was almost halved to 349 million sq ft at the end of December 2011 from 751 million sq ft in March 2008.
Experts say it is just the tip of the iceberg: unlisted developers account for more than double, or 60 per cent, of the debt of listed companies.
According to industry estimates, all top 11 listed real estate developers started the year with a net debt of Rs.41,700 crore, which was 14 per cent more than the year ago.
"This is a difficult situation for developers. The debt burden is huge and they have to pay huge amount as interest rate every quarter. If the situation does not improve, they may have to put some of their large portfolio projects for sale," Amit Goenka, national director (capital transactions) Knight Franks India, said.
The country's largest developer DLF Limited accounts for more than half of the debt burden of these listed companies. According to the company's financial report as of December 31, 2011, it had a debt of Rs.22,725 crore. In 2011-12 fiscal, DLF's net profit fell by 27 per cent to Rs.1,200.82 crore from Rs.1,639.61 crore in the previous year. The company paid Rs.603.89 crore as interest in last quarter alone.
Despite asset sales, DLF was able to decrease its debt by only Rs.33 crore. The company has a mandatory debt repayment of Rs.3,900 crore within this fiscal. "Our main focus is to reduce debt by selling noncore assets. The company will focus more on selling non-core assets and is targeting to raise Rs.5,000 crore-Rs.6,000 crore," Rajiv Singh, vicechairman, DLF, said after announcing its financial results.
Even Unitech is resorting to asset sales. According to industry sources, the company is planning to sell some of its noncore assets like IT park and SEZs to pay off debt. The company's last reported debt stood at Rs.5,190 crore. HDIL, another large developer, had a debt of Rs.4,100 crore as of December 31, 2011. It recently sold a two-acre plot at Andheri, Mumbai, to the real estate arm of Adani Enterprises for Rs.900 crore.
Another National Capital Region-based real estate giant Parsvnath Developers is selling land banks, including its prime property on Kasturba Gandhi Marg. The firm has recorded a debt amount of Rs.1,250 crore. The company also has plans to sell non-core assets in Kochi and Chennai.
Others like Sobha Developers have already managed to reduce their debt. It has sold many of its non-core assets and managed to reduced its debt to Rs.1,183 crore as on 31 March from Rs.1,800 crore.
The situation is set to become worse as land banks have already started shrinking. For example, DLF's land bank was almost halved to 349 million sq ft at the end of December 2011 from 751 million sq ft in March 2008.
Experts say it is just the tip of the iceberg: unlisted developers account for more than double, or 60 per cent, of the debt of listed companies.
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