Europe’s largest real estate investment and development firms by the name of Redevco, with a $10 billion portfolio, is understood to be looking at investing around Rs 300 crore in various projects of Bangalore-based Sobha Developers. Redevco, part of the diversified Cafro Holdings, which is into private equity, retail, financial services and renewable energy, in addition to real estate development, set up office in India in late 2008. If the discussions with Sobha fructify, it will be it’s first investment in India. Investment banking sources indicated that Redevco has had initial discussions with the management of Sobha Developers, which is mired in debt like many of its peers. If the investment materialises, it is expected to be tied up by September 2009. Private equity investments into Indian real estate have been slowing over the past three quarters and this deal is expected to be a major one. While Redevco said it had nothing to comment, Sobha has been maintaining that it is in talks with various funds and nothing has been finalised. Over the past two quarters, Sobha has been aggressively looking at three options to reduce its debt burden of close to Rs 1,900 crore, a leverage of 1.6 times. The company, which has Infosys as one of its major clients, is looking to raise around Rs 850 crore by selling around 200 acres of its 3,000 acre land bank, offloading up to 49 per cent stake through special purpose vehicles and to offload up to 25 per cent stake at the enterprise level. Sobha is understood to have identified around 150 acres of land on which projects can be implemented through special purpose vehicles by divesting stakes. The company is also engaged with around 12 banks and financial institutions to restructure around Rs 850 crore of debt that will be due for payment during the next 18 months. Banking sources indicate Sobha has been able to get a nod for a part of that sum and talks are also on with mutual funds to roll over Rs 350 crore of debt.

Customers who have booked flats in New Town Heights, the project being developed by the country’s largest real estate developer DLF Ltd, at Gurgaon, near Delhi, are planning to take the Gandhigiri route to show their “disappointment” with the execution of the project. Around 200-300 of them are planning to gather at DLF’s office to give out roses along with their exit letters to the company. The company, which is facing a similar problem from its Chennai customers on account of the Garden City project, has agreed to pay back the booking amount between April 30 and September 30, 2009 to those who have given exit letters so far. The Gurgaon group, which consists of around 700 customers who have booked flats in New Town Heights, is planning to go with bouquets of flowers with exit letters to DLF’s office. It is believed that over 70 per cent of DLF’s customers want their money refunded since the company has not started any construction work at the project site. New Town Heights, a residential project at Gurgaon, was launched in March last year as a mid-range housing project with apartments selling in the Rs45-75 lakh range. The project has around 3,300 apartments, of which around 90 per cent have been sold. DLF on March 25, 2009 announced a price cut of 20 per cent for apartments in New Town Heights, for both existing and new customers. But the discount comes with conditions and does not allow exit at a future date. 20 per cent discount was offered on the Basic Sale Price (BSP), and an increase in area by 5 per cent was implemented, without any charges for that increase. Ten per cent timely payment rebate on the sale value (excluding government charges) was implemented as well. Meanwhile the company has decided to return booking amounts in full to all customers who want to exit the under-development project. According to a member of the committee, in the Chennai project, the company has sent a letter saying it would repay the money between April and September 2009 to those customers who have given exit letters between February 18 and April 9 based on the order of exit letters received by DLF. 560 customers have given exit letters. DLF Garden City, launched in January 2008, has around 3,493 apartments and was priced between Rs 31 lakh and Rs 39 lakh, but the company has slashed prices by 10-18 per cent

Unitech Ltd, the country’s second-biggest real estate developer, plans to raise $250 million (Rs 1,250 crore) through private placement of shares to qualified institutions, to repay part of its debt of over Rs 8,000 crore. The New Delhi-based developer plans to raise the funds by the end of this month. The company is planning to reduce Rs 1,000 crore of debt on its books by June this year. The real estate company has hired UBS and IDFC as arrangers for issue. Unitech’s move comes after the developer withdrew its application with the Foreign Investment Promotion Board (FIPB) in February to raise Rs 5,000 crore from the sale of securities. A year earlier, the company planned to raise Rs 7,500 crore through a qualified institutional placement (QIP). The recent rally in the stock market seems to have encouraged Unitech to revive its QIP plan. The company’s stock has climbed 70 per cent since March 9, while the benchmark Sensitive Index has risen 32 per cent. The company’s stock rose more than 14 per cent in the past two trading sessions and closed at Rs 42.05 on Thursday. If this QIP goes through, it will be the first such placement in as many as eight months after the Securities and Exchange Board of India changed QIP norms. Last August, the SEBI had amended pricing norms for QIPs by allowing companies to fix the price based on the average price of two weeks. Earlier, companies had to fix the price based on six-month average prices. Not a single QIP issue, however, has hit the market since then. QIP deals, which were struck during the Bull Run at hefty premiums, have now turned sour because of the sharp fall in the valuations of listed companies. The mark-to-market (MTM) value of QIP deals raised between March 2006 and March 2009 has fallen 73.47 per cent to $1.75 billion (about Rs 8,841 crore) from $6.58 billion (about Rs 33,245 crore), according to data from SMC Capital.

The real estate sector is showing signs of revival in Kolkata, on the back of an increasing investment in the residential segment. Property developers are of the view that there has been a significant improvement in demand in the last couple of months, and atleast one has increased prices in the last one month. According to PS Group, prices were increased for one of their projects by Rs 200 per square foot to Rs 1,899 per square feet in the last one month. Several real estate developers are also planning to launch new projects, which they have been holding for the last six months, which could be seen as a manifestation of demand revival. The demand for residential projects has started picking up, and the worst is probably over for the real estate sector, at least in Kolkata. P S Group is planning to launch two new residential projects in Narendrapur and Rajarhat by May this year. Property prices in Kolkata and its fringes have seen a correction of almost 25 per cent in the last six months. Santosh Rungta, President, Confederation Of Real Estate Developers Association Of India (CREDAI), stated "The real estate scenario is now taking a turn for the better, not only in the eastern part, but across the country. For instance, in Mumbai, there are reports that one developer could sell 700 flats in just two days." However, the demand for commercial and retail projects is yet to see a pick-up, and the segments are still reeling under the pressure of economic meltdown. Also, rising cost of cement has been a cause of concern for the developers, though the rise has been partly set-off by falling metal prices.

Parsvnath Developers is planning to cut its debt by a quarter by the end of this fiscal, even as it has stalled 11 of its special economic zone (SEZ) projects. The New Delhi-based developer, which restructured Rs 800 crore of debt last year, plans to repay Rs 400 crore debt to banks and financial institutions. The company plans to repay the debt through internal accruals or from the large outstanding receivables in various projects. Parsvnath’s current cost of debt is 12-13.5 per cent as compared with 11.5 per cent one-and-a-half years ago. The company does not have any short-term debt due for repayment this year. Parsvnath had plans to develop 17 SEZs. While it has acquired land for six, 11 SEZs have been put on hold. Another real estate company, DLF, has also sought de-notification of four of its IT SEZs due to lack of demand. The entire process of acquiring land in these SEZs has been put on hold at Parsvnath. They have suspended land buying. The current focus is to complete existing projects.