News & Views on Indian Real Estate

Friday, June 27, 2008

Rs 8,000 Crore Premium Realty Projects Face Delay

India's largest real estate company DLF bought the 17.5 acre Mumbai Textile Mills land for Rs 702 crore from the National Textile Coporation (NTC) and announced a futuristic retail-cum-entertainment centre in Lower Parel. The project, which was earlier expected to be completed this year, is unlikely to be over before 2010.The same year, Shiv Sena leader Manohar Joshi's Kohinoor Group and Raj Thackeray's Matoshree Realtors bought the Kohinoor Mills land in Dadar from NTC for Rs 421 crore. The land was expected to be converted into a plush retail mall, but the property was put up for sale following disagreements between the retailers and the developers over rentals. So far, no one has bought the land. According to industry estimates, around Rs 8,000 crore of real estate projects covering over 40 million square feet are facing delays. Analysts said the construction cost for large commercial projects was Rs 2,000 per square foot, on average. In the process, developers are facing huge cost overruns. According to analysts, construction cost is growing 20 per cent every year and the developers are carrying a compounded interest burden of 30 to 40 per cent after three years. Real estate observers believe that cost of the projects has doubled in the last three or four years owing to the rise in input and construction costs, and increase in interest rates. Steel and cement prices, which are the main components in property projects apart from labour, have risen nearly 50 per cent since December 2005.The reasons for the delays are varied: tardy government approvals, stop-work notices from the municipality, construction delays, labour unavailability and so on. Though developers maintain that their projects are on schedule, in private they blame the delay in getting government approvals.

Anonymous said...

But the stock rate of DLF is very low at present which is to be show the market value is to be down after that the whole development.

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