Macrotech Developers Ltd, formerly Lodha Group, has laid off 350-400 people, amid the liquidity crunch, mounting debt and the ongoing slump in the real estate market, said three people, requesting anonymity.
Macrotech, considered India’s largest realty developer by sales, has dismissed mid-to-junior level employees and contract workers, including engineers, architects and salespeople, working at its housing projects, said the first person.
The company has 42 under-construction residential projects, including The World Towers and Lodha Park, comprising several high rises in central Mumbai, including Lower Parel.
According to rating agency Icra, central Mumbai has unsold inventory worth ₹45,000 crore as of June end.
In volume terms, the micro-market accounts for 32% of the total unsold units in the city.
“With no fresh luxury projects coming up in the near future, the better strategy is to lay them (employees) off. While a majority of the job cuts have happened in the engineering section, sales teams have also been trimmed," said the second person.
Apart from its luxury housing projects, the company is also building commercial and warehousing space, and a 4,000-acre township, Palava, in Mumbai’s suburbs.
A Macrotech spokesperson confirmed the development but said that the job cuts were part of its annual performance review.
“The annual performance-driven management of associates based on meritocracy has been completed this year. The total number of associates who have been asked to seek opportunities outside the company is less than 1% of our total employment base of approximately 50,000," the spokesperson said in an email response. The company has no further plans of any such action till the next further appraisal cycle in mid-2020, the spokesperson added.
Macrotech Developers has no further plans to downsize its existing workforce till the next appraisal cycle in mid-2020, the company spokesperson added.
Around 3,700 people are directly employed with the company.
With a prolonged slump in the luxury housing segment, several real estate companies are either consolidating their businesses or shifting their focus on affordable housing. Few cash-rich developers are even moving into the commercial realty business.
Despite a huge pipeline of projects, all is not well for Macrotech like many of its peers. Its second attempt to hit the capital market was deferred once again.
The company had planned to raise ₹4,500 crore through the proposed initial public offering (IPO) primarily to repay debt.
As a per a 23 August note by India Ratings and Research, Macrotech’s gross debt increased 13% to ₹25,640 crore in FY19, “mainly led by drawdown of construction finance loan for its London projects".
Last November, the company had said that it was exiting its London business, with plans to sell two projects in the city for around ₹5,000 crore.
In August, global credit rating agencies, including Moody’s Investors Service and Fitch, downgraded Macrotech for the liquidity risks the company is facing.
A former Macrotech employee, who was asked to leave the organization, said it happened all of a sudden. “We know resources were being diverted to projects which had bookings, but we had expected a reshuffling of teams," he added.