INDIA BUSINESS WORLD - JULY 1st - JULY 31st - 2008
UNITECH REALTY FUND RAISES $300 MILLION
UNITECH International real estate fund is learnt to have raised $300 million, which will be deployed in Unitech’s residential projects. The new fund will help the country’s second largest listed developer tide over the liquidity crunch dogging almost all real estate firms at present. A senior Unitech executive said that an European pension fund, a Japanese bank and some Europebased HNIs have invested in the Unitech fund. Unitech International Real Estate Fund is an independent fund launched by Unitech on the lines of Unitech Corporate Park (UCP). It is an AIM-listed entity, which owns Unitech’s IT parks.
UBS acted as the placement agent for the fund. Unitech’s asset management arm, Unitech Realty Advisors, will advise on the deployment of fund, which has a horizon of 10 years. The entire corpus of $300 million will be deployed in Unitech’s residential projects spread across the country in the next few months.
Realty sector is facing a tough time, with residential segment being the worst hit. Housing sales have declined by up to 80% in most markets across the country leading to a major cash crunch for developers. Residential projects in India generally work on the self-finance model, with home buyers making payment in advance for the houses to be delivered usually three years later. But with fewer home buyers in the market, several developers are stuck with projects, raising the probability of late deliveries. A sluggish demand and the rising cost of capital and construction have forced investors to shun real estate on Dalal Street also. The shares of realty firms have been in a free-float mode touching all time-lows, in most cases.
Unitech has lost almost 75% off its January peak. Country’s largest realty developer DLF is faring no better. The company was prompted to announce a buyback of its shares after its scrip plunged to Rs 350 on July 2, a decline of 71% this year.
Analysts have been routinely downgrading real estate sector, given the rising inflation and interest rates and sluggish demand. Credit Suisse Group cut its rating for DLF from ‘neutral’ to ‘underperform’ and Unitech’s to ‘neutral’.
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