Sun-Apollo Real Estate Advisors has invested Rs 75 crore to pick up nearly 50 percent stake in Assotech’s subsidiary firm which would develop this project. Assotech has infused Rs 76 crore for nearly 51 percent stake in the subsidiary. “We are entering into the Gurgaon market by launching a 12-acre housing project in partnership with Sun-Apollo. This is our first project to receive private equity investment,” Assotech Managing Director Sanjeev Srivastava told reporters.

The project, which is located on Dwarka Expressway, has been launched at a price of about Rs 5,000 per square feet. He said the company has bought the licensed land where it would develop about 580 apartments, 23 villas and 102 flats for economically weaker section. “The total investment in this project ‘Assotech Blith’ would be about Rs 500 crore including the land cost over a period of the next three years,” Srivastava said.

The investment would be met through equity contributions from both the partners, bank loans and advances from customers against sales, he added. Sun-Apollo Principal Alok Aggarwal said: “The two partners are committed to invest more if required for construction activities”. The private equity firm has also invested in real estate projects of Parsvnath Developers and Godrej Properties in north India. “We will do more projects with Assotech in future if there is good opportunity,” Aggarwal said.

Assotech is currently developing many housing and hotel projects in the National Capital Region (NCR), Uttar Pradesh, Odisha, Uttarakhand, Madhya Pradesh and Bihar.

The Sahara Group is engaged in discussions with Parsvnath to buy its commercial land near Connaught Place in New Delhi, according to sources. ICICI Bank is also among the contenders for the piece of land, it is learnt.

The 1.18-acre plot at Kasturba Gandhi Marg was bought by Parsvnath in 2008 for about Rs 200 crore, with the aim of constructing a retail-cum-office complex. But the realtor is now looking to sell it to cut mounting debt, currently at Rs 1,300 crore.

Although the Parsvnath management is looking for a price of Rs 700 crore, the interested parties are ready to sign a deal at Rs 600 crore, sources said. Property consultant Jones Lang LaSalle is advising Parsvnath on the deal.

Pradeep Jain, chairman, Parsvnath Developers, did not respond to repeated calls and e-mails. Mails to Sahara spokespersons did not elicit any response.

An ICICI Bank spokesperson said, “ICICI Bank has no plans to acquire this property.”

According to sources, ICICI is exploring the possibility of constructing a corporate house in the locality in partnership with Parsvnath, without acquiring the land.

Earlier, as part of its fundraising exercise, the company had entered into various deals with private equity funds.

In January 2011, Parsvnath signed an agreement with SUN-Apollo India Real Estate Fund LLC for an investment of Rs 100 crore in its premium residential project at Ghaziabad—Parsvnath Exotica. SUN-Apollo had acquired 49.9 per cent stake in the project SPV.

Then, the company sold a minority stake in Delhi-based residential project Parsvnath La Tropicana to JP Morgan for about Rs 150 crore. Through the deal, the previous investor, Red Fort Capital, made an exit. The company had plans to construct an office complex at Connaught Place along with the PE firm.

According to realty experts, demand for land at prime localities has risen as corporate houses look to move their headquarters to such locations.

Anuj Nangpal, director-investment advisory, DTZ India, a real estate consultancy, said, “Organisations are increasingly signaling their arrival or resurgence by moving their presence into the centre of metros. The branding benefit of such ownership of prime real estate far outweighs the costs. Further, employees are also increasingly assessing their jobs and future basis of their office infrastructure and the pride in occupying prime real estate clearly impacts long-term retention.”

An association of developers, Confederation of Real Estate Developers Association of India (Credai), has asked member developers to reduce prices, but no one seems willing to announce any cuts.

“The government has imposed a number of taxes on the real estate sector. It needs to roll them back,” said DLF chairman KP Singh. He, however, didn’t make any commitment on price cut. “Prices are a function of demand and supply. Today, supply is far ahead of demand,” he said, adding that housing demand will pick up only after interest rates are brought down to 6-7%.

Most developers are banking on the possibility that the Reserve Bank will slash rates that will in turn bring home buyers back into the market. Many developers don’t think it is possible to slash prices.

Delhi-based Emaar MGF feels lower interest rates and an improvement in general economic sentiment are the answer to revive residential market, not price cuts. Emaar MGF managing director Shravan Gupta says several micro-markets across the country have already seen a correction of 20-25%.

“We have already cut prices, which have brought our margin down to 15% from 30% last year. If we cut prices further, our margin will get wiped out,” said Mr Gupta.

Parsvnath Developers chairman Pradeep Jain, too, feels prices are unlikely to come down, even though builders may focus on small-size homes to bring down overall cost. “The ticket size will get smaller for making homes more affordable. But per square feet rate will not come down,” said Mr Jain. He is the president of the Delhi chapter of Credai, which gave a call to its 3,500 members on Wednesday to reduce prices.

There is a wide spectrum of views among developers on price correction in the residential market. Even as Emaar MGF’s Mr Gupta says a price correction of around 25% has been seen in several micro-markets across the country, Mr Jain of Parsvnath says prices have remained stable. Another Delhi-based realty firm Omaxe CMD Rohtas Goel says prices have reached ‘rock-bottom’ by having corrected up to 40-50%.

The correction, developers say, is not with respect to the rates at which transactions were made in the past. “There is no benchmark to compare rates of new launches. We can only compare it with our estimates of prices, which similar projects could have fetched in good market,” says Mr Gupta.

Therefore, price correction, as mentioned by developers, remains debatable. Developers say price correction can be seen only in new launches, as old buyers will not allow builders to reduce prices in an ongoing project.

The Parsvnath Nano City project would come up in Panchkula near Chandigarh. The realty firm would invest about Rs 400 crore in the form of equity and debt in the project, Parsvanath Developers (PDL) Chairman Pradeep Jain told reporters here.

“It is a public-private partnership project in which Haryana government will have 10% equity stake, Parsvnath developers will have 38 % and the remaining 52 % will be with Sabeer Bhatia promoted group,” he added.

The project, spread over 1,000 acres of land and modelled on Silicon Valley, would be completed in two phases over the next 10 years, where the company would develop 5,000 acres in the first phase and the remaining would be developed in the second phase.

New Delhi-based DLF’s planned $255 million share buyback is “ill advised” and the funds would be better used for new projects. Its stock price target was cut 48% to 342 rupees.
Sobha Developers Ltd. and Parsvnath Developers Ltd. were also cut by Agarwal and Noorani. Unitech’s price target was cut to 175 rupees from 353 rupees. Indiabulls Real Estate Ltd., the nation’s fourth-largest developer, was upgraded to “neutral” from “underperform”.
Sobha fell 1.4 percent to 248.95 rupees in Mumbai trading. Parsvnath shed 1.1% to 112 rupees.

The grade A developers which are facing crash crunch include DLF, MGF Emaar, Shobha Developers, Unitech, Omaxe, Parsvnath Developers, Hiranandani Group, Ansal API, BPTP Developers and TDI Group.

As a result of the crash crunch many developers have started going slow or even stopped construction of projects which are either in their initial stages of development or which would not affect their bottom-line in the near future. While most developers agreed with the problem at hand, none of them were ready to be quoted on how it had affected them.

Cushman & Wakefield executive MD (South Asia), Mr. Sanjay Verma, said, “There are visible signs that the global liquidity crunch has started to impact real estate companies in India. It is becoming extremely difficult for both small and large realty companies to organize financing, given the global liquidity crisis. The recent slowdown in demand, high interest rates, rising input costs and meltdown of realty stocks have only added to their problems. The real estate companies are in dire need for credit and other sources of capital to complete projects at hand and also to sustain their expansion plans. Some companies are able to access capital, albeit at very high costs, which in the long run may not be a sustainable solution, especially given the size of the market and consequent need for large chunks of capital”.

Many in the industry feel that notwithstanding the final verdict on the extent of global economic slowdown and recovery of financial institutions, real estate players in India may continue to face liquidity problems in the near future due to global credit crunch and unfavourable stock market conditions for raising capital.

What’s more, bankers say they may now get more cautious towards lending to real estate developers. HDFC Bank chairman Mr. Deepak Parekh said, “Real estate companies have many projects at hand and the sales have been constantly dwindling. Analysing these sentiments, any financial institution will be cautious. Remember, during monsoons, housing sales come down and banks may have to consider increasing interest rates further in future”. State Bank of India is no different. It is also contemplating similar measures.

Industry experts feel the only avenue available for raising capital in the current situation is at the project SPV level and by way of private equity or similar sources, which is generally the most expensive method of raising capital and has limitations on the over all extent of financing that is required. JLLM chairman & country head Anuj Puri said, “Concerns about liquidity will continue to plague the market since debt will not be easily available. Real estate players had traditionally raised money from debt funds via corporate deposits and commercial paper. However, debt funds are currently not eager for more exposure in real estate and are continuously rolling over the debt advanced to these players. The primary source for institutional funding will, therefore, now be private equity”.

This would suggest that the ongoing sell-off in real estate stocks is a good opportunity for bargain hunting. Yet, most brokerage houses are advising their clients against doing so, as they foresee testing times for the sector in the near term. In fact, many of them are recommending that existing investors cut their losses right away as they could be in for a long wait for share prices to come anywhere near their lofty highs.

The sharp rise in real estate prices, coupled with high borrowing costs has let to softening of demand. The slump in the stock market, too, has contributed to the trend as many investors were earlier routing their gains in share trading into real estate.
Industry experts feel that companies that have managed to buy land in Mumbai at reasonable rates could be good bets even in these turbulent times.

The flagbearers of the industry like DLF and Unitech have fallen around 50% from their peaks, while other names like Ansal Housing and Construction, Ajmera Realty & Infra India, Omaxe, Lok Housing and Construction, Parsvnath Developers have fallen nearly 60%. With outlook on the market as a whole being bearish, brokers expect realty stocks to slip further.
Most property developers in India were riding the wave of an unprecedented demand due to a combination of rising affluence, tax benefits for home owners and low interest rates. But, this fuelled speculative buying in the sector, causing property prices to soar to exorbitant levels.

Essar Oil’s refinery expansion project at Vadinar may turn out to be the only such upcoming project to be denied a 100% tax holiday available to refinery projects. This follows the finance ministry’s decision which allows refinery projects to enjoy the tax holiday only if they have a joint venture with a public sector company that holds a 49 per cent stake. Shares of Essar Oil ended at Rs 257.75 on the BSE.

Italy is fast turning into a hunting ground for Indian auto companies and more so for Mahindra & Mahindra. The tractor and utility vehicle maker is learnt to have set sights on Italian motorcycle marque brands — Cagiva and MV Agusta — famed for designing high-end, high-performance superbikes that are a rage on the speed motorcycle circuit. Mahindra & Mahindra shares closed at Rs 662 on the BSE.

Parsvnath Developers may bag the development rights for one of India’s biggest infrastructure projects, the Rs 1,850-crore Nanocity to come up in Panchkula near Chandigarh. The project, spread over 11,138 acres, being jointly promoted by Hotmail founder Sabeer Bhatia and the Haryana State Industrial and Infrastructure Development Corporation is modelled on the Silicon Valley and will come up in two phases. Shares of Parsvnath Developers ended at Rs 222.35 on the BSE.

Tech Mahindra has paid British Telecom $110 million as ‘exclusivity fee’ for an impending mega-deal with the UK-based telco. The company is in exclusive negotiations with BT along with a consortium partner that is a large global IT player for a significantly large deal. Tech Mahindra scrip gained 2.42 per cent to Rs 956.05 on the BSE.

Champagne Indage took over assets of UK-based wine supplier, Darlington Wines for an undisclosed amount. This is company’s fourth overseas acquisition and a part of its strategy to strengthen its overseas presence. The stock ended at Rs 530 on the BSE.

BSEL Infrastructure Realty will develop about 70 million square feet in the Iskandar region in southern Malaysia. The company will be investing Rs 18,000 crore over 12 years to develop residential and commercial property in the area. The stock ended at Rs 50.55 on the BSE.

Tata Coffee is eyeing a distribution company in Russia which owns a couple of well-known coffee brands, reports DNA Money. Shares of Tata Coffee climbed 1.35 per cent to end at Rs 228.20.

Peninsula Land and Arrow Webtex will form a joint venture to enter hospitality business. A special purpose vehicle will be created which will be held 50-50 by both the partners to build business hotels. In the first phase, an equity infusion of about Rs 100 crore is envisaged by both the joint venture partners in equal proportion.

Bombay Dyeing is considering demerging its real estate business into a separate company, reports DNA Money. The hiveoff will be followed by an initial public offering. The stock gained 5.35 per cent to close at Rs 973.15 on the BSE.

Stock specific action is likely with a slew of corporate results from the likes of Suzlon Energy, Bharat Forge, GMR Infrastructure and Tata Teleservices Maharashtra.

Parsvnath had several project in hand. Parsvnath would be focusing on development of SEZs, hotels, highways, retail and telecom.

Parsvnath’s application for the unified license was rejected by the Department of Telecom last week. So they can’t make their entry in telecom business. On this point, Mr. Jain said, “We will get into the telecom sector and our investment will be in the range of up to Rs 20,000 crore”. However, he has not explained the strategy and said that the company is watching the situation.

On the issue of other businesses, Jain said the company would enter the retail business in a big way and would soon announce its roadmap. The company is in talks with some of the major international retailers. Parsvnath is also believed to be in talks with two French majors Carrefour and Club Casino to set up retail chains in India. Jain said that “we are sure to open our first retail store in 2008 and possibly will start with Delhi”. Jain said that the roll out of the retail outlets would start from this calendar year itself.

On the topic of types of retail stores and branding, Jain said that the details were being worked out but the stores would be in large formats such as complete food bazaar and as far as branding was concerned, the company would take a decision after finalizing the overseas partner. The company owns over 14 million square feet of land for retail business in 48 cities and that would be an advantage for Parsvnath as all other prospective retailers would have to bank upon them for space.