Builders look to defer projects on slowing demand, cash crunch

Builders look to defer projects on slowing demand, cash crunch

New Delhi / Bangalore: Hit by slowing housing demand and a severe liquidity crunch, real estate companies are scrambling to defer most of their projects—residential, commercial, retail and hotel developments—especially in and around metros.

In Gurgaon, near New Delhi, several projects of developers, including DLF Ltd, Unitech Ltd and Parsvnath Developers Ltd, are now delayed by at least six months.

Also See: Project Hiccups (Graphic)

Two of Unitech’s projects in Gurgaon—Fresco and The Close—were scheduled for completion by December, but are now expected to be ready only by the end of 2009.

Phase I of the company’s Unitech Grande project, the super-luxury residential project in Noida, outside New Delhi, is also delayed by at least six months and is now expected to be delivered by July 2010, according to analysts and consultants.

Parsvnath’s Exotica project in Gurgaon has been delayed by three-four months and is expected to be delivered in the second quarter of 2009. According to a Parsvnath executive who didn’t want to be named, the first phase of the project will be ready by March and the entire project will be completed by the first quarter of 2011.

“Initially, the delay was because of approvals required for projects at various stages, shortage of manpower and poor project management skills," said an analyst with a brokerage firm who didn’t want to be identified, referring to the industry as a whole. “From there on it has become a question of liquidity."

DLF’s Pinnacle and Icon, both in Gurgaon, were to be completed in the second quarter of 2008, but will now be ready only in the first quarter of 2009, according to real estate consultants.

DLF and Unitech didn’t respond to emails seeking comments on the specific projects.

Earlier this week, at the India Economic Summit of the World Economic Forum, DLF chairman K.P. Singh said some of the company’s residential, commercial and hotel projects have been delayed because of a slump in real estate demand and the liquidity crunch.

“Demand has gone down so substantially that projects are being shut down across the country," he had said on the sidelines of the summit.

The Prestige Shantiniketan, Bangalore, doesn’t even have an expected deadline after a 15-storey tower came crumbling down recently. The project has been running two years behind schedule. The Prestige Group didn’t respond to emails.

Godrej Properties Ltd’s maiden project in Bangalore, Godrej Woodsman Estate, has also failed to meet the November deadline.

“We are hoping to finish it by April-May next year," said a senior Godrej official who did not want to be identified because he is not authorized to speak to the media, but declined to elaborate.

K. Ramakrishnan, executive director, investment banking, of Park Capital Advisors Pvt. Ltd, says he is sceptical of developers meeting their new deadlines for projects. “A lot of developers are going to rethink their pricing strategy and cut down on profit margins if they want to sell and finish projects on time. They will also reformat their units, which means shrinking Rs60-70 lakh flats down to smaller Rs30-40 lakh units," said Ramakrishnan.

The delay is not limited to residential projects alone.

Developers have either put on hold or are going slow on their mall and hotel projects due to cash flow problems.