A developer of luxury condominiums in one of Mumbai’s popular business districts is seeking private equity funds to buy distressed assets from rivals reeling under record debt.
Sunteck Realty Ltd., whose clients include Bollywood stars such as Aishwarya Rai and Sonam Kapoor, is in talks with investors as it sees acquisition opportunities similar to those that followed the 2008 collapse of Lehman Brothers Holdings Inc., Chairman Kamal Khetan said in an interview.
“Developers with huge debt are in pain with high interest rates and servicing debt is a struggle for many,” he said in an interview in his Mumbai office. “We can use this to our advantage, we will use our strong balance sheet to grow the company double or triple from here.”
Many Indian real-estate companies, grappling with a funding squeeze, are turning to private equity as lenders struggling to pare bad loans shun more risk. Sunteck is among those that emerged relatively unscathed from the global meltdown and a domestic slowdown, even as bigger rivals found themselves holding excess inventory amid dwindling sales.
Home sales in India’s top six property markets fell 8 percent in the quarter through March from a year earlier, according to research firm Liases Foras, which estimates it will take at least 46 months to find buyers for unsold homes in Mumbai alone.
Surging Debt
Some of India’s largest developers have seen debt surge more than 60 percent as mortgage rates around 10 percent deter buyers. Debt at Godrej Properties Ltd. climbed 63 percent to 27.64 billion rupees ($431 million) in the quarter through March 31 from a year earlier, while DLF Ltd., India’s biggest, saw a 7.7 percent increase in its net debt to 209.7 billion rupees.
Stressed assets accounted for 11.1 percent of loans in the country’s banking system as of March 31, the highest since 2002, official data show.
Sunteck, with a net debt at 9.6 billion rupees as of March 31, said it will take advantage of its relatively better balance sheet to acquire assets, Khetan said.
The Mumbai-based company plans to build condominiums and offices after purchasing the assets, and may lend its brand to help complete projects that are stuck, he said. It may even develop property jointly with the existing builder, he said.