High-value property demand for now, is in a coma. But does Omaxe have an alternate plan to survive?

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High-value property demand for now, is in a coma. But does Omaxe have an alternate plan to survive? Ratan Lal Bhagat presents an insider tale on the whats, whens and whys...

“The going has got really tough for realty players in the current situation of the global economic downturn,” states Rohtas Goel, CMD, Omaxe Limited, voicing out the predicaments of both his company and that of his peers and competitors in the Indian Realty sector. The American financial crisis, meltdown at Wall Street coupled with the misery at NYSE & Dow Jones and chaos at Dalal Street have marred many a dream of building skyscrapers. And India was no exception. The domestic Realty sector (once considered as the driver to the impeccably zooming economy) has taken the maximum beating from the current slowdown. The cascading southward trend of the Indian realty index, which fell by a tantalising 42.98% during the past quarter, stands testimony to the aforesaid statement. The colossal erosion in stock values of all the major players has only worsened the situation and overburdened the funds desiccated realty ship, which is already reeling under the bad weather of dropping sales, high interest rates and drying up of private equity sources.

In such quagmire, Omaxe Limited, one of the major contributors to the Indian Real estate success story, like others is trying hard to battle out the odds, to survive and to grow if the sun shines for long on the once sunrise sector...

Omaxe had ventured into the Real Estate Development business in 2001 to ride and encash the-then country’s most promising sector. Till date, the bullish Omaxe has completed and delivered 11 projects – inclusive of 8 residential, 1 integrated township and 2 commercial setups – covering approximately 5.59 million sq. ft. The completion story till here sounds good. however, it is the work-in-progress where the situation looks iffy. The company currently has 54 projects – including 23 group housing projects, 16 integrated townships, 14 shopping malls and commercial complexes and 1 hotel – under development in ten states in all four zones of the country. Even Goel minces no words in explaining the danger himself, as he promptly adds, “On one hand, sales in the sector are dropping because of rising home loans, and on the other, the developers are facing a credit crunch, which is halting many promising projects.” “The demand in the real estate sector has already slackened by 30% and even though developers are offering discount up to 30%, sales are not picking up,” adds N. Wadhwa, Director, SKI Capital Limited.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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