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Realty firms explore new markets
August, 19th 2009

With the real estate sector story looking up in large parts of the country, Bangalore-based realty companies are now exploring options to enter new markets. Among the interested players are Puravankara Developers, Sobha Developers and Nitesh Estates, three of Bangalores large real estate companies. It is learnt that these players are drawing up plans to invest in cities like Mumbai, Goa and Pune.

Provident Housing, a fully owned subsidiary of the Puravankara Group, is said to be in talks with individual land owners in Mumbai to buy land in three locations for affordable housing projects. An industry tracker said Provident Housing is largely looking at western Mumbai for this venture.

Ashish Puravankara, director, Provident Housing confirmed the plan to enter the Mumbai market through affordable housing projects though he declined to share details on locations.

We have not bought any land yet and are exploring options in Mumbai, he said. The cause for concern, according to analysts, comes from the fact that companies in the sector are highly leveraged. Purvankara, for instance, had a debt of Rs 582 crore on its books at the end of FY09 even as company officials maintained that the debt-equity ratio at 0.56 was favourable.

Like Purvankara, Sobha Developers is also keenly looking at Mumbai and Pune. A source in the industry said that the company is close to sealing a deal with another developer for an affordable housing project. JC Sharma, managing director, Sobha Developers, when contacted said:

Mumbai is an attractive market and we are certainly interested in it though nothing concrete has been decided so far. After a recent debt restructuring exercise, Sobha has reduced its debt from Rs 1,900 crore to Rs 1,450 crore. We are at a comfortable position as far as debt is concerned, he added.

Joining Purvankara and Sobha is Nitesh Estates which has already bought a large tract of land in Goa for a high-end project. We would be developing higher end villas in Goa, LS Vaidyanathan, director, Nitesh Estates. The company is planning to raise around Rs 1,200 crore through an infusion of private equity (PE) funding and a planned public issue. Nitesh is also said to be interested in the Mumbai market.

The consensus is that money will not be easy to raise at a time like this. It will be interesting to see how these companies arrange for the funds for these projects. While PE money is hard to come by, it will not be easy to take the capital markets route, said a consultant at an international real estate firm.

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