The real estate division of the Jaypee Group, part of Jaiprakash Associates, has been unsuccessful in its bid to monetize land and other assets, and in finding partners for stalled projects
Bengaluru/New Delhi: With buyers facing long delays in getting possession of their homes and pressure from lenders building on the developer, what does the recent turn of events in Jaypee Group mean for their real estate business?
The real estate division of the Jaypee Group has been building large townships since its inception in 2000. The property development business is part of Jaiprakash Associates Ltd, the holding company of the Jaypee Group.
Last week, the promoters of the debt-strapped Jaypee Group sold its cement assets to UltraTech Cement Ltd at an enterprise value of ₹ 16,189 crore, but in the process, lost control of Jaiprakash Associates to lenders.
Jaiprakash Associates, with a consolidated debt of ₹ 58,250 crore as of 31 March, is seeking to reduce debt by raising money through asset sales, Mint reported on 5 July. With the decision of the joint lenders’ forum to invoke strategic debt restructuring (SDR), the company said its board has constituted a committee of directors to evaluate various options necessitating financial restructuring and deal with debt management, the report said.
Jaypee’s real estate arm has also been trying to sell some of its land and other assets for a while now. Executives at property consultants said that the company has been trying to sell large tracts of land in the National Capital Region (NCR) and find buyers or developer partners to take up its incomplete projects, many of which have been stalled for quite some time.
“Exactly how the lenders will address the liquidity issues that the real estate company is facing right now is not clear. Many of the projects are mortgaged to the banks as project cash flows are weak. We have been trying to sell land for them but where are the buyers in the current market conditions?" said a property consultant, who didn’t wish to be named.
Jaypee didn’t respond to email queries.
Jaypee’s real estate projects include Wish Town, a 1,162 acre mixed-development project in Noida, the 2,500 acre Jaypee Greens Sports City in Noida, and a 450 acre Jaypee Greens project in Greater Noida.
As a group, Jaypee has large land holdings. For instance, its infrastructure unit Jaypee Infratech Ltd has significant land reserves, which if it is able to monetise, can ease the pressure on cash flows.
Another consultant, directly familiar with Jaypee’s efforts to sell its real estate assets said: “Some of the projects, that are stalled, need to be restarted and they are talking to other developers to find solutions to the problem but these are early days. Any new investor or developer who comes in will have to make a significant investment."
Homebuyers in several Jaypee projects are divided on how the recent incidents will play out.
Jaypee Klassic and Krescent are part of the mega Wish Town project which include several other townships such as Kassia and Kalypso Court, launched between 2006-2012, with nearly 35,000 flats in total. Only about 5,000 owners have been given possession.
Nrip Kumar Mehta, co-ordinator of Wish Town buyers’ movement and a buyer in Jaypee Krescent Homes project in Noida, said “It seems very encouraging as of now. But it will only be advantageous to us if they utilize the money from the deal in developing the Wish Town. It is a step in the right direction. It is a ray of hope. This will definitely put pressure on Jaypee to look after the interests of the buyers."
Mehta added that Sameer Gaur, managing director and chief executive, Jaypee Sports International Ltd, had told buyers in June that the firm will intimate them on the project wise date of delivery by 31 August. Gaur, according to Mehta, also said that by 31 July, the company will inform buyers as to where they will get the funds to finish the projects.
“There is not too much capital required here. I think if ₹ 1,000 crore sort of sum is utilized in Wish town, it will ensure that project is completed and people get their houses," said Markandey Mishra, a member of Jaypee Wish Town Flats Social Welfare Society and a buyer in Jaypee Wish Town Klassic project in Noida.
Mishra has been given possession but he continues to fight a case in consumer court for fair compensation for the delay. Nrip Kumar Mehta is still awaiting possession.
Speaking on the NCR real estate market, Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt. Ltd said: “It is a vicious cycle for most developers in the region today where they are stuck because they need money to construct and cash flows are weak, because they are linked to construction milestone, which aren’t being met."
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