From the article below it looks like the financiers who have loaned money to the builders against pledged shares have been subprimed due to the rapid fall in real estate stock valuations. This is looks like a case of mini Fannie and Freedie who were forced into nationalization since the valiue of the their underlying assets were indeterminate. The ponzi scheme of builder bidding against each other using loaned money has collapsed under its own weight.
As a reminder in this article we are not taking about the availablity of land, the demand/supply situation, the GDP growth of 8% or the exploding population in cities.
Everything which can go wrong in financing has gone wrong with the construction industy and the relentless greed to acquire land has landed these folks into the a death spiral. DNAIndia has this report
Realtor debt to be twice revenues:-
Pooja Sarkar
Tuesday, February 3, 2009 2:48 IST
Mumbai: Ah ! well a-day ! what evil looks Had I from old and young ! Instead of the cross, the Albatross About my neck was hung.
-- Samuel Taylor Coleridge, in The Rime of the Ancient Mariner
Hung it is, around the neck of realtors. For their debt repayments are likely to be twice their revenues over the next 12 months, analysts assess.
That's the new concern for realty players after their worst quarterly results. All major players except Anant Raj Industries and Indiabulls Real Estate -- including DLF, Unitech, Puravankara and Sobha -- are in the line of fire.
"In most cases, we expect debt repayments to be more than twice revenues over the next 12 months," said Bhaskar Chakraborty and Param Desai of institutional brokerage IIFL.
DLF, India's largest realty player according to market capitalisation, reported a 62% drop in its revenues in the December quarter to Rs 1,367 crore as against last year's Rs 3,598 crore. DLF has to repay Rs 4,300 crore of debt in the next six months.
Rajiv Singh, vice-chairman of the company, said funds to the tune of around Rs 3,000 crore have already been tied up for this.
At an analyst call on Monday, Singh said receivables from DLF Assets Ltd (DAL) are approximately Rs 5,000 crore with no money during this financial year.
"Receivables as at end of current fiscal are likely to outstriprevenues if DAL is unable to raise funds in the current fourth quarter. We feel this could be one of the reasons why sales to DAL have been stopped," Chakraborty and Desai said in a note on Monday.
Ergo, DLF has had to fund the receivables via incremental borrowings.
Singh said the company's target of developing 50 million square feet this year is in doldrums.
"God knows when it can be completed," Singh said. Chakraborty and Desai expect Unitech, India's No.2 realtor, to have revenues of Rs 1,200 crore and debt repayments of more than Rs 3,000 crore next fiscal.
To top it, the company has to repay Rs 2,500 crore by the end of this financial year.
Similarly Bangalore-based Puravankara Projects had raised debt worth Rs 830 crore of which loans maturing within next twelve months is Rs 427 crore. It's revenues in the December quarter was nearly halved to Rs 80 crore.
Ditto another Bangalore builder Sobha Developers. Its revenues also nearly halved to Rs 180 crore in the December quarter. The company has Rs 1,090 crore of debt to repay.
Another analyst with a European brokerage, who did not wish to be named, said even though developers' debt is more than revenues, banks and financial institutions can do nothing more than extend the loan period or rollover short-term loans into long-term loans.
However, another analyst from a domestic brokerage, who, too, did not want to be named, said lenders may rather prefer to unload shares held as collateral.
Realtor debt to be twice revenues:-
Pooja Sarkar
Tuesday, February 3, 2009 2:48 IST
Mumbai: Ah ! well a-day ! what evil looks Had I from old and young ! Instead of the cross, the Albatross About my neck was hung.
-- Samuel Taylor Coleridge, in The Rime of the Ancient Mariner
Hung it is, around the neck of realtors. For their debt repayments are likely to be twice their revenues over the next 12 months, analysts assess.
That's the new concern for realty players after their worst quarterly results. All major players except Anant Raj Industries and Indiabulls Real Estate -- including DLF, Unitech, Puravankara and Sobha -- are in the line of fire.
"In most cases, we expect debt repayments to be more than twice revenues over the next 12 months," said Bhaskar Chakraborty and Param Desai of institutional brokerage IIFL.
DLF, India's largest realty player according to market capitalisation, reported a 62% drop in its revenues in the December quarter to Rs 1,367 crore as against last year's Rs 3,598 crore. DLF has to repay Rs 4,300 crore of debt in the next six months.
Rajiv Singh, vice-chairman of the company, said funds to the tune of around Rs 3,000 crore have already been tied up for this.
At an analyst call on Monday, Singh said receivables from DLF Assets Ltd (DAL) are approximately Rs 5,000 crore with no money during this financial year.
"Receivables as at end of current fiscal are likely to outstriprevenues if DAL is unable to raise funds in the current fourth quarter. We feel this could be one of the reasons why sales to DAL have been stopped," Chakraborty and Desai said in a note on Monday.
Ergo, DLF has had to fund the receivables via incremental borrowings.
Singh said the company's target of developing 50 million square feet this year is in doldrums.
"God knows when it can be completed," Singh said. Chakraborty and Desai expect Unitech, India's No.2 realtor, to have revenues of Rs 1,200 crore and debt repayments of more than Rs 3,000 crore next fiscal.
To top it, the company has to repay Rs 2,500 crore by the end of this financial year.
Similarly Bangalore-based Puravankara Projects had raised debt worth Rs 830 crore of which loans maturing within next twelve months is Rs 427 crore. It's revenues in the December quarter was nearly halved to Rs 80 crore.
Ditto another Bangalore builder Sobha Developers. Its revenues also nearly halved to Rs 180 crore in the December quarter. The company has Rs 1,090 crore of debt to repay.
Another analyst with a European brokerage, who did not wish to be named, said even though developers' debt is more than revenues, banks and financial institutions can do nothing more than extend the loan period or rollover short-term loans into long-term loans.
However, another analyst from a domestic brokerage, who, too, did not want to be named, said lenders may rather prefer to unload shares held as collateral.
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