Peninsula projects delayed by up to 1 year

MUMBAI: Real estate companies are clearly not having a good time. Peninsula Land, a Mumbai-based developer, is no exception to this rule. It has delayed its new project launches in Nashik, Pune and Hyderabad by 6-12 months.

“Projects outside Mumbai will be ready for launch in the next 12 months. We are in the pre-development phase and plan to start the project in the first half of next year,” says Rajeev Piramal, executive vice-chairman, Peninsula Land.

The Ashok Piramal-backed realty group had announced plans to develop five projects outside Mumbai. This included one residential and one township project in Nashik which were to be launched in July 2008. The integrated township and IT park in Pune was to be launched in August 2008, while an integrated township-cum-IT park in Hyderabad was to be launched in the third quarter 2008. The total developable area for these projects is approximately 21 million square feet.

These projects were expected to be operational by 2013.

Sources say the delay in these projects has pushed back the realtor’s plan of entering Ahmedabad, Chennai, Mysore, Bangalore and Coimbatore by next year.

Delay in the realtor’s Mumbai based projects is also evident. “They have only sold 50% of the Peninsula Business Park at Dawn Mills in Lower Parel,” says a real estate analyst who does not want to be named.

“Our first priority is to complete the existing projects. The Ashoka Towers, the 30-storeyed building, would be ready in the next 6 months and the 50-storeyed tower would be ready in next 9 months,” says Piramal.

Ashoka Towers was originally expected to be complete by December 2008.

Peninsula’s hotel venture has also been put on hold for one year. “Next year we are looking at western and southern India for hotel development. These properties will come up largely in Tier I cities,” says Piramal.

Peninsula Land had earlier planned to develop 125 hotels across India in a joint venture with Arrow Webtex. In the first phase, it was to deploy Rs 100 crore to develop 10 hotels.

Analysts attribute these delays to the company’s business strategy of trying to pre sell half of the area in each of the projects during the project launch stage. This ensured enough cash flow for construction phase. With the real estate market looking rather dull right now, Peninsula has been unable to pre sell to get cash for the development phase.

The company was also supposed to get funding of $125 million from Lehman Brothers Real Estate Partners, the real estate fund of Lehman Brothers. According to sources, this funding is not coming through. But Piramal neither confirmed or denied the
development. “We had an understanding that Lehman will invest in Peninsula’s projects but they hadn’t committed anything. As and when we open our projects we will see the requirement of private equity. We are not looking at any funding as of now. Nothing is happening on those projects right now.”

Peninsula had signed a memorandum of understanding (MoU) with the fund which would hold minority stakes in Peninsula’s projects. The real estate fund of Lehman Brothers was going to take a maximum 40% stake in its Hyderabad project, where Peninsula had bought land parcel of 31 acre from Rallis India.

But another analyst adds, “Even though Lehman Brother’s funding is not coming to the company, they have secured bank loans and cash to invest in the projects. It is only the delay in the project development which is affecting the company.”

As analysts have different views to offer Peninsula officials had earlier told DNA Money that Lehman Brothers Real Estate Partners had raised money from non-Lehman sources and thud the company would not be affected.

According to Piramal, Peninsula is going to deploy the money from Indigo, the Rs 250 crore domestic real estate fund of the company.

“We are mainly looking at investing in the 6 cities we are presently in. We are also looking at opportunity picking up property through distress selling in these markets.”