Sluggish sales, poor performance of the stock on the bourses and difficulty in raising money from banks and private equity (PE) players are forcing many real estate developers to turn to sell their land banks to raise funds to complete their projects. “A lot of real estate credit is lying unused by the banks and the banks are extremely cautious and selective in lending money to real estate players,” Naveen Raheja, chairman and managing director (CMD), Raheja Developers, said.
“Few players, who have good credibility and track records in terms of repayment of loans and overall past experience, are only being lent money by the banks,” Raheja added. As banks remain reluctant to lend to the realty sector large companies like DLF, Emaar MGF, Omaxe and HDIL, among others, that have huge debt portfolios are turning to sell their land banks to reduce their debt and raise money for their pending projects. DLF, the country’s largest developer, sold land worth Rs 403 crore in Pune, Amritsar and New Gurgaon in the third quarter of 2010-11. It is planning to sell 12 million sq ft this fiscal to raise about Rs 7,000 crore. DLF said it will continue to sell land assets to raise money.
DLF, in its annual presentation, had already indicated that going forward the company would focus on launching plots than group housing as it helps generate faster cash flows. DLF needs to repay Rs 2,700 crore debt this fiscal and has net debt of Rs 21,424 crore. The company said that of the planned launch of 12 million sq ft sales this fiscal, 10 million will be plotted development in cities like Indore, Gurgaon, Chandigarh and Lucknow. The rest will be group housing projects.
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