E-Paper
Qips not the answer, raise demand, say realty experts
Fund raising through Qualified Institutional Placements (QIPs) might have brought a respite to highly-leveraged developers, but this euphoria could be short lived according to experts.
Fund raising through Qualified Institutional Placements (QIPs) might have brought a respite to highly-leveraged developers, but this euphoria could be short lived according to experts.
“This (QIPs) is only a short term solution,” says a report by CRISIL Research, on the real estate companies’ efforts to use this route to tap funds and retire mounting debt. “If the real estate sector has to recover from the serious
miscalculations made in the past, a strong rebound in demand is imperative,” it said.
Experts are concerned that developers are giving priority for capital value enhancement rather than demand creation. Prices are still beyond the budget of a large section of buyers.
The real estate bubble busted in early 2008 when prices hit unreasonably highs, forcing genuine home buyers to stay away. This, along with economic slow down, dragged developers into a debt trap.
Starved of funds, realty companies like Unitech, Indiabulls, HDIL and Sobha Developers raised money through QIPs. But with this the promoters’ holding got eroded in the companies, so did public shareholding.
After two QIP issues promoters shareholding in Unitech, for instance, declined from 65.5 per cent to 43.8 per cent according to the report. Unitech had raised Rs 3,300 crore by QIP.
