Credit crisis to hit realty projects

The US financial crisis, which has seen some big Wall Street giants collapsing, is bound to have a cascading effect on the Indian realty market, especially on the commercial sector that has already slowed down considerably over the past one year. According to industry sources, there could be a softening in the values of commercial property to the tune of 10% to 15% post-US meltdown. As a result, vacancy levels in commercial space across the country is expected to touch 10% by the end of this year from 6% last June. Marketmen see prices cooling and projects being held up because of the drying up of cheap funds. In fact, now raising funds from US and Western European investors, who accounted for a bulk of FDI in the sector, will be difficult.

Lehman Brothers had picked up 50% stake in Unitech's Mumbai project for Rs 740 crore. It had also invested $ 200 million in DLF Assets Ltd, which is formed by DLF promoters. Meanwhile, tighter liquidity at home is encouraging companies to defer their property bookings. The other factor that will pull the prices down is the enormous supply lined up. By early next year, Mumbai and its suburbs will add 15.4 million sq ft of office space, more than the commercial space now available at the Bandra-Kurla Complex or seven times the office space at Nariman Point. NCR will add more than 12 million sq ft in coming months. Real estate developers, who were thinking of raising money through an IPO in the near future, would now hesitate to go to the capital market. The realty companies which have strong internal accruals would sail through, but those dependent on debts and private equity would feel the pressure.

Realty stocks hit 52-week lows :

Mumbai, Sept. 29 Realty stocks took a tumble on the bourses and many logged their 52-week low on Monday.
The BSE Realty Index closed at a 52-week low at 3,407.87, down 5.26 per cent. It had dropped 16.79 per cent over the week from 4,095.50, and 31.78 per cent over the month. In January, the index clocked a high of 13,848.09.
Over the week, almost all real estate company stocks have taken a hammering, dovetailing the Sensex’s fall with the negative market sentiment at an all-time high, which this week is compounded by the wait for the US congressional nod for the $700-billion bailout package for bankrupt investment firms there.
Delhi-based DLF Ltd stock closed at Rs 350. 60, 5.12 per cent lower than its previous close. The DLF issue was priced at Rs 525. (52-week high – Rs 1,225, low Rs 329)