Sub-Prime shadow on Indian Realty.

The turmoil in the global financial markets has cast its shadow on India’s largest real estate deal. Delhi-based developer BPTP Ltd, which was banking on overseas institutions to fund the acquisition of 94 acres of prime land at Noida for Rs 5,006 crore, has sought an extension to pay the first installment of the money.
On March 12, BPTP Ltd, promoted by entrepreneur Mr. Kabul Chawla, had bagged the rights to develop the land. The deal required it to pay the first installment of around Rs 1,251.5 crore (25% of the bid amount of Rs 5,006 crore) to the Noida authorities within 30 days. That deadline expired earlier this month and the company has now sought a 60-day extension.
It now has 60 days to pay the amount with an additional 14 per cent interest impost. The extension request has been granted, said a senior BPTP executive. He further added, “We will pay the money before the 60-day period ends”.
The executive, who requested anonymity, added that BPTP had almost closed a deal with some foreign banks to raise the required money. But the banks, caught in the sub-prime crisis, went through a management overhaul and the loan to BPTP got stuck.
India’s real estate developers, especially the mid-sized ones, have been facing a liquidity crunch since last year. Developers can no longer tap the external commercial borrowing route, while domestic borrowing costs have gone up on account of tight-fisted monetary policy, which is likely to harden further in days to come.
In addition, the stock market has taken a beating with real estate stocks falling off their recent highs. Other sources of funding for instance — the London Stock Exchange’s Alternate Investment Market or listing real estate investment trusts abroad — are also not feasible in current market conditions.
The tender that BPTP won, beating bigger players like DLF and Omaxe, has an “exception clause” that allowed the company to seek an extension to pay the first tranche.
Failure to make the payment within the extended deadline would result in the award being scrapped and a fresh tender being announced, Noida officials said. The earnest money amount of Rs 100 crore will also stand forfeited.
BPTP Ltd had a turnover of around Rs 1,100 crore and a net profit of Rs 220 crore in financial year 2007-08.