Desperate times in realty leading to unprecedented restructuring-II

By: Ravi Sinha

Track2Realty Exclusive

During the boom, many developers dreamed of transforming the urban landscape with millions of square feet of homes, offices and malls and set off on an aggressive expansion financed with debt that at 6 percent interest was cheap by Indian standards.

But in 2011, home sales in the financial hub of Mumbai fell 45 percent from a year earlier while sales in the New Delhi region were down 20 percent, according to consultant Jones Lang LaSalle India’s Real Estate Intelligence Services. Sales in Bangalore and Hyderabad were also lower, with Chennai recording the lowest fall at about 5 percent.

As a result, job cuts are one of the many restructuring measures by the realtors. Many consultants agree that real estate developers have been under pressure for the past one year. Funding for the industry has almost dried up, high interest rates have dampened sales and debt-servicing costs are inching up. For some developers, cutting down on workforce helps as new projects have dwindled due to delayed approvals and fresh funding crunch.

Sources said Mumbai-based developers like Indiabulls Real Estate, Rustomjee Group and K Raheja Universal were among the companies that have dished out pink slips already, mainly on the sales and marketing side. Delhi-based companies like Emaar MGF, Parsvnath Developers and Unitech have also been in the retrenchment mode in the last one year. Though officially most of these companies have denied it, others preferred not to answer.

“This is happening in a silent way. For example, every division has been given a task of reducing their workforce to a certain level through assessment levels,” said a source close to the development at one of the companies.

However, the realtors maintain that things are improving and that they may look at hiring more. Some industry experts seem to agree.

“As an industry in totality, there are no lay-offs. In fact, we are expecting recruitments from a number of reputed players. However, there could be some stress at the individual company level. Further, it is the weak season, as construction activity slows down during monsoons and thus recruitment on the construction side may be sluggish,” said Naushad Panjwani, Executive Director, Knight Frank India.

The big question, however, remains—despite the desperate times leading to unprecedented restructuring, will the crisis be over any time soon?