Indian Property Struggles As Funds Stay Away

May 12, 2009 - PRLog -- India's troubled property developers are seeing early signs of a rebound, but high debt costs and a lack of private equity funding suggest a sustained recovery is unlikely for some time. Enquiries for homes and offices remain strong in Asia's third-largest economy as it grows at an annual clip of 6-7 percent, but buyers are staying away as developers dither over sharp price reductions that could turn pent-up demand into sales.Foreign investors, scarred by the global sub-prime crisis, are wary of investing in a property market beset with red-tape, land disputes and unclear titles. And with no clear sight of prices bottoming, like home buyers, they are staying away.

Major developers, who have seen their share price slide by up to 90 percent from last year's peak, expect the market downturn to last another 3 to 4 quarters even as property markets elsewhere in Asia show signs of turning a corner. "Anything I buy today, I may get at half-price later. We have a decline in front of us," said Gulbir Madan, managing partner at New York-based Brahma Management, which runs a $500 million India-focused property fund. It has invested only a fifth of its capital since 2007. Property prices doubled in the two years after India eased rules in early 2005 on overseas investment in its construction industry, partly fuelled by interest from foreign investors.
But the sharp rise, followed by interest rate hikes to calm inflation and global financial turmoil have battered the sector. Property sales are down more than half from a year ago, and developers are piled with unsold and incomplete projects.

"All new property buying has been suspended for the moment," said Pradeep Jain, chairman at New-Delhi based Parsvnath Developers . Parsvnath, among the earliest real estate firms to raise equity through an initial public offering in 2006, last week said dwindling cash flows had pushed it to restructure half of its 16 billion rupees ($325 million) bank debt. Without cash, new projects that promise future growth have come to a standstill, beating down stock prices. The real-estate sector index is down 83 percent from its peak.......http://www.maaproperties.com/Pages/ModuleContent.aspx?Mod...

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