Raghavendra Kamath in Mumbai
Real estate developers, who need to pay around Rs 25,000 crore (Rs 250 billion) on debt instalments in the current financial year, could face an uphill task. For, equity issuances remain uncertain and cash flows have dwindled.
According to Reserve Bank of India estimates, developers have piled up debt of Rs 75,000 crore (Rs 750 billion). Public sector banks restructured debt worth Rs 10,000 crore (Rs 100 billion) in 2009 and allowed them a roll over.
By March 2011, developers need to repay this amount. An additional Rs 15,000 crore (Rs 150 billion) will be due this year, says a recent report by Kim Eng Securities. What has made matters worse for developers is that the Reserve Bank of India has already ruled out fresh restructuring for them.
Equity route risky
The equity route, earlier a hot favourite of property developers to repay debt and fund projects, is turning out to be tough. After developers such as Omaxe could not raise fresh equity, Delhi-based Parsvnath had to cut its Qualified Institutional Placement size by half, due to poor investor response. Sobha Developers had to reduce the amount expected from a QIP after it failed to raise funds in its first attempt last June.
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Image: Builders in trouble! Rs 25,000-crore debt payment looms
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