Greater Noida Authority cancels allotment of 1,200 plots

The Greater Noida Authority cancelled allotments of around 1,200 plots on Tuesday on account of non-payment of pending dues by their owners. 

These include 1,173 residential plots in different sectors of the city. Authority officials informed that allotments of 25 industrial plots and 12 institutional plots have also been cancelled.

Officials informed that the authority has taken the extreme step because it is reeling under a huge financial crisis to the tune of over Rs 6,000 crore to a number of banks and financial institutions. Non-payment of dues for several terms by plot allottees has added to the financial burden of the authority.

The cancellations were effected after the allottees failed to pay up three consecutive pending dues against their respective plots despite repeated notices issued by the Greater Noida Authority. Officials said that more cancellations might be effected in the near future as notices are being issued to several other allottees who have goofed up on making timely payments.

All plots, which had been allotted through different schemes by the authority since the year 2009, have been cancelled. Cancellation letters, said officials, have been issued to all allottees losing their plots.

“The cancelled plots will be put up for fresh allotments through a leftover scheme. The details of the scheme are being worked out following which the plots would be put up for sale,” said Manvendra Singh, DCEO, Greater Noida Authority.

Greater Noida Authority intends to raise revenues through the re-allotment of these plots so that debts and loans incurred by it can be cleared. A portion of the revenue so raised would also be used for paying compensation to farmers in lieu of their land in accordance with the Allahabad high court verdict of October 2011.

However, the authority also informed that it would give the first preference to original allottees of these plots to regain their allotments through a restoration process. Allottees would have to clear their pending dues together with penalties. “They will also be required to pay stiff restoration charges for regaining possession of their plots,” added Singh.

Parsvnath debt remains a worry, Ansal profit falls

Realty firm Parsvnath Developers Ltd (PDL) said recently that its consolidated net profit fell 28% in the third quarter and it failed to reduce its Rs. 1,300 crore debt because of the rising cost of building material and high interest rates. New Delhi-based PDL’s net profit in the three months ended 31 December fell to Rs. 22.54 crore from Rs. 31.37 crore a year earlier. The firm’s revenue increased 6.8% to Rs. 239.62 crore.

“Our profit has declined because of higher expenditure on construction and employees cost besides higher interest cost,” Parsvnath Developers chairman Pradeep Jain told reporters. The company’s net debt stood at around Rs. 1,300 crore at the end of third quarter, he added. It had reported debt of about Rs. 1,200 crore during the second quarter ended 30 September.
 

“Debt remains a major concern for most real estate companies. The realty index will continue to underperform,” said Param Desai, a research analyst at Nirmal Bang Equities Pvt. Ltd, a Mumbai-based brokerage.

Another Delhi-based real estate firm, Ansal Properties and Infrastructure Ltd reported a drop in third-quarter profit and revenue. Net profit fell 35% to Rs. 21 crore from Rs. 32.37 crore a year earlier. The company’s revenue during the October-December period, too, declined by 35.1% to Rs. 226.1 crore.

According to a January report from brokerage IDFC Securities Ltd, despite the three months to December being the festive quarter, new launches and sales failed to result in any significant improvement for real estate firms. Sale of non-core assets has become the preferred mode of reducing debt for realtors.

“There has been an absolute slowdown. Sales dropped for most firms; results are on expected lines,” said Sharan Lilaney, an analyst at Angel Broking Ltd.

PDL plans to sell non-core assets in Kochi and Chennai to reduce debt, Jain said. While the land parcel in Kochi is meant for developing an information technology special economic zone, the Chennai plot is designated for a mixed-use development. The firm recently invited bids to sell its commercial tower project in central Delhi. Source: Indian Express

ASK Property Investment Advisors to raise INR 10 Billion by December

India’s ASK Property Investment Advisors aims to raise a 10-billion-rupee ($219 million) fund by December in a bet on the long-term case for property in Asia’s third-largest economy. The real estate-focused private equity firm, which manages assets worth more than 9 billion rupees, is in talks with developers in five of India’s largest cities to deploy the funds, Amit Bhagat, chief executive officer and managing director, said. 

“In the downturn, if you invest, chances are there for superior returns,” Bhagat told Reuters. Slowing economic growth is mounting pressure on property prices in India, which are expected to “correct partly” in locations such as Bangalore and Chennai, Bhagat said. “We will invest in cities and suburbs, not extended suburbs. The fund will focus on residential projects in Mumbai, Pune, Chennai, Bangalore and the Delhi area, he said. ASK has already received commitments for more than half of the 10 billion rupees it is plans to raise, he said. The first fund of 3.4 billion rupees, raised in 2009, has been fully invested, Bhagat said.

Real Estate Companies Adding Rs 14 crore debt a Day

The debt load of 11 listed real estate companies in the country has risen 15 per cent, or by Rs 5,000 crore, to Rs 38,500 crore in the last 12 months. That’s nearly Rs 14 crore of debt added every single day. Most of the increase happened in the latter half of the last fiscal which ended on March 31, DNA reported, citing an analysis by Aashiesh Agarwaal and Adhidev Chattopadhyay, analysts with Edelweiss Securities. A huge chunk of this — or Rs 21,520 crore — is being borne by DLF. That number is up 16.6 per cent, or by Rs 3,060 crore, from Rs 18,460 crore in the last 12 months. Meaning, DLF alone added more than Rs 8 crore per day to its debt bloat. 

What makes things worse, Agarwaal and Chattopadhyay said, is developers are finding it tough to generate enough cash flows to take care of interest payments. That makes it difficult for realtors to even think of reducing the debt load in the medium term, they said. Amit Goenka, national director, capital transactions, at Knight Frank India said the cost of servicing this debt has also increased in the period from 14-15 per cent to around 18 per cent for listed players. “The situation may be worse for the unlisted players — they will have to cough up another 200-300 basis points,” he said. Interest rates on home loans have risen more than 200 basis points in the last 12 months due to which loan sanctions are also getting delayed.

The critical issue for realtors over the next 12 months would be to ensure their debt load doesn’t enlarge, especially since fund availability is constrained and many loans are coming up for repayment in this fiscal. The net debt story for the listed realtors is mostly about three players — HDIL, Unitech and DLF, points out another analyst with a foreign brokerage. While DLF has started looking at options to reduce debt, HDIL and Unitech continue to say they are comfortable, but we don’t think so,” the analyst said. The overall debt may stabilise than go up. In the context, a good traction in sales becomes another crucial imperative, he added.

Realtors based out of Bangalore have been the best in this regard, the Edelweiss duo said. Not surprisingly, Sobha Developers and Prestige Estates have both managed to reduce their debt levels — Sobha by 7 per cent from Rs 1,400 crore to Rs 1,300 crore in the last one year, and Prestige Estates by 37 per cent from Rs 1,900 crore to Rs 1,200 crore in the same period. Realtors operating in the National Capital Region near New Delhi, on the other hand, have had a mixed run, while those in Mumbai continue to grapple with slowing sales. How will all this affect property buyers? “There could be project delays and worse, project failures. It could also translate to more distress sales of projects midway to stronger players and compromise in quality - more so among the unlisted players,” Goenka warned.

Rs 630 cr penalty on DLF for unfair trade practices

Anti-competitive practices watchdog Competition Commission of India (CCI) has imposed a penalty of Rs 630 crore on India’s largest real estate developer, DLF Ltd, for abuse of market dominance and unfair trade practices.

The penalty amounting to seven per cent of Rs 9,006.27 crore, the company’s average annual turnover in the last three years, was slapped after CCI found merit in complaints of alleged “abuse of dominant position” by putting “discriminatory and abusive clauses” in the apartment agreements provided to the allottees of two of DLF’s high-profile residential projects in Gurgaon.

DLF shares closed 5.92 per cent lower on the Bombay Stock Exchange at Rs 189 a share on Tuesday. When contacted, DLF Group Executive Director Rajeev Talwar told Business Standard, “We are reading the order.”He said the company was in the process of consulting legal experts on how to proceed.

In a unanimous verdict on August 12, CCI ordered DLF to cease and desist from formulating and imposing “unfair” conditions in its agreements with buyers in Gurgaon. The commission also wanted DLF to modify such conditions within three months.

The two projects are expected to have a total of 2,200 flats, priced between Rs 1.5 crore and Rs 3 crore each, making the total worth of the apartments Rs 4,500-5,000 crore.

The projects, which started in August 2006, were expected to be completed in three years, but the developer extended the deadline later. In addition to the delay, DLF increased the number of floors in the apartment complex from the original figure given to customers.

This led to the number of apartments in one project, Belaire, increasing to 564 from 384, which irked the customers as it meant more flat owners must share the same common facilities.

The CCI verdict is expected to have an overall impact on real estate players, as its investigation has found the unfair conditions imposed by DLF are a common practice among several developers.

The company has the option to challenge the CCI verdict in the Competition Appellate Tribunal. Source: Business Standard

Fund Hit Realtors Selling Land Banks to Complete Projects

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.