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Market blues hit real estate public issues

business Updated: Dec 22, 2011 23:28 IST
HT Correspondent
HT Correspondent
Hindustan Times

Customers may be in for a surprise as far as prices of residential apartments are concerned. Developers are finding it tough to raise funds through the primary market, thereby increasing liquidity woes.

Developers who had plans to raise around Rs8,500 crore in 2011 were unable to do so, leading to liquidity pressure. According to a report published by SMC Global Securities, 36 companies that had plans to raise Rs32,000 crore through the capital market have either called off their plans or postponed them. Of these six companies are from the real estate sector.

“28 companies have called off their plans to raise funds through the capital market,” said Jaganndadham Thunuguntia, strategist and head of research SMC Global. “The list mostly included real estate companies such as Lodha Developers, Ambiance Real Estate, Kumar Urban Developers, Neptune developers, BPTP, Raheja Universal and Lavasa Corporation.”

Following the recent slowdown in the markets, developers are increasingly turning towards the debt and private equity route to raise funds, experts said. "Private equity is becoming cautious so the only route remaining is raising funds through debt," said Anshul Jain, CEO, DTZ India, a global real estate consultancy.

In a earlier interview with HT, Abhishek Lodha, head, Lodha Developers had said that the company had no plans to go to the primary market in 2011. After postponing a plan to raise Rs2,500 crore through initial public offering (IPO), the company opted for a combination of private equity and debt route to fund its projects.

“Of the last 30 IPOs only 3 of those were able to perform and all others were traded at a discount,” said Jain. Analysts predict that 2012 is going to be even tougher. Besides unsustainable high prices demanded by developers, buyers are also staying away from buying properties due to high interest rates charged by banks and financial institutions.