Real estate firm Parsvnath Developers Ltd expects stake dilution in individual projects to help it control its debt and hold margins in a rising interest rate regime, a top official said. The New Delhi-based developer reported a 16% drop in first quarter net profit at 712.9 million rupees. Net sales were also disappointing, up just 5% from a year ago, to 3.65 billion rupees. “The bottomline was down because of higher interest costs and input costs,” Chairman Pradeep Jain said. Parsvnath was mainly hit by a more than five-fold rise in its interest burden to 174 million rupees. The company is currently carrying debt of about 17 billion rupees, compared to 10 billion rupees a year ago, when interest costs were also lower by a third. India’s central bank this week raised a key lending rate for the second time in two months, to a seven-year high, as part of efforts to cool down the economy and curb double-digit inflation. Banks have reacted by pushing up lending rates to customers to their highest in almost a decade. Real estate developers in India have been hit by the rising rates as they struggle to cope with a large number of unfinished projects, but are faced with sharply lower demand as high rates bite property buyers dependent on home loans for funds.“Our average cost of borrowing is 12.85% and has risen about 20 basis points in the last three months,” Jain said, adding that his firm is currently borrowing at rates in the 13.5-14% range.“We are trying to reduce debt. We are looking at equity dilution in our SEZ (special economic zone) and hotel projects for this,” Jain said, adding the company was in talks with a few partners for due diligence. Earlier this year, Parsvnath sold 30% in a Mumbai project to two real estate funds for 1.86 billion rupees. Several other large developers have also leaned on private equity deals in the past year, to unlock value in ongoing projects. Parsvnath shares ended at 111.75 rupees, down 0.9% in a firm Mumbai market that ended 0.5% higher.