Bangalore: The infrastructure arm of the Reliance-Anil Dhirubhai Ambani Group (R-Adag) has stalled an ambitious project to build a 77-acre business district, including a 100-storey tower, in Hyderabad that would have marked its debut in the real estate industry, a group executive said.
Reliance Infrastructure Ltd decided to delay the execution of the project by between six months and eight months, said the executive, who didn’t want to be named. The decision came in the face of a downturn that has hit the realty market hard.
Last October, Mint had reported on the firm’s intention to raise at least Rs4,000 crore for the first phase of the project that would be built at a cost of Rs8,000 crore.
Reliance Infra has been unable to raise the Rs4,000 crore, and is yet to tie up with an international hospitality company for the project’s hotel component.
The company has also not got the required number of tenants for the commercial space that forms the bulk of the project.
“The project has not moved in the last few months because Hyderabad has been pretty badly hit due to its dependence on the software sector. We will get back to the project only after the markets look up,” said the senior R-Adag executive, who is not authorized to speak to the media.
Information technology (IT) and IT-enabled services (ITeS) firms have been hurt by the global recession that has forced overseas clients to reduce technology spending. Combined with the domestic economic slowdown, it has reduced demand for commercial and office space.
The company, at the early stage of the downturn last year, had decided to lease the entire tower rather than sell it off because it didn’t want to lose ownership rights.
“None of the IT-ITeS companies want to expand now and it’s difficult to get anchor customers for such (a) huge space. We have the equity to develop the project now, but it is not the right time to execute it under the present market conditions,” said the R-Adag executive. Big hospitality chains are also deferring new business plans, he added.
The project is being implemented through a special purpose vehicle formed by Reliance Infra, which has a 66% stake, Bangalore-based Sobha Developers Ltd, the technical partner having a 23% stake, and the Andhra Pradesh Industrial Development Corp. Ltd, with an 11% holding.
George Johnson, city head (Hyderabad) of Jones Lang LaSalle, a property advisory, said demand for commercial space in the city had dipped by about 30% as IT companies curtail expansion plans.
“Lots of companies are also moving out of the central business district areas even though rentals have fallen over the last few months,” he added.
Besides the Hyderabad project, Reliance Infra is also developing a mixed-use project planned on about 220 acres, which it won after getting the contract to build a Metro rail line between the New Delhi railway station and the international airport. The company still plans to go ahead with this project.