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| HDIL to sell development rights for 400k sq ft |
| Raghavendra Kamath / Mumbai Apr 02, 2009, 00:17 IST |
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Company unfazed by slide in prices of TDR.
Mumbai-based property developer Housing Development and Infrastructure (HDIL) is selling 400,000 sq ft of transferable development rights (TDR) worth Rs 42 crore in the market, even though TDR prices have been falling swiftly for some time and may go down further.
The announcement of the sale was made today. Analyst worries notwithstanding, the market seemed to welcome the news. HDIL stock ended the day at Rs 89.90, over nine per cent higher than Tuesday’s price.
TDRs are the additional built-up area granted in lieu of area surrendered by an owner of land or space for any redevelopment or a public purpose project. A TDR owner can use the rights himself in other areas of a city or sell it to other parties.
At the end of the December quarter, HDIL had 1 million sq ft of TDR as stock-in-trade, having sold less than 0.5 m sq ft in that period.
TDR prices have fallen by 75 per cent in the past year, due to fall in property prices and increase in the supply of these rights after the state government increased the permitted floor space index (FSI) under the slum development schemes. TDR prices per sq ft have fallen from Rs 4,000 in March 2008 to Rs 1,000 now.
“We believe that oversupply and lack of demand in this market could push down prices even further,” equity brokerage Alchemy said in a recent report.
“I do not think there is going to be a good demand for TDR in today’s market. The absence of large scale commercial and residential activity has led to low demand,’’ said an equity analyst who did not wish to be quoted.
But the company is not worried, as it feels there is still room for profits. “Today, when our TDR cost is Rs 850 a sq ft and we sell it at Rs 1,100 a sq ft, we still make a margin of 15 per cent. We cannot sit on our inventory. We can use the proceeds to repay our debt, reduce interest burden and improve cash flows,” HDIL deputy general manager Hari Pande told Business Standard recently.
HDIL is one of the largest players in slum redevelopment and is expected to generate 10 million sq ft of TDR from the Mumbai international airport project by March 2010 and a total of 50 million sq ft in the next four-five years, from rehabilitating 85,000 slum dwellers from 276 acres of land. TDR sales currently comprise 15 per cent of HDIL’s revenues.
The company recently rolled over Rs 2,200 crore of debt it has taken from nationalised banks, having a total now of Rs 4,000 crore debt on its books. It borrowed Rs 3,000 crore this year, mainly for its airport rehabilitation project in Mumbai.
The company is also in talks with nationalised banks to raise around Rs 1,000 crore to fund its new expansion plans. The company has launched new projects in Kurla, a central suburb of Mumbai and Andheri, on the western suburbs, where it claims that it has booked over 70 per cent and 40 per cent of the apartments, respectively. HDIL is also expected to soon launch new realty projects in Mumbai.
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