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Real estate company Unitech is increasing its construction spending so that it can deliver at least six million sq ft of developed area this financial year, a jump from its rate of four million sq ft annually in the past few years.
The company has nine million sq ft of delivery pending from the before 2009, when the economy started slowing. Overall, it has 12 million sq ft due for delivery. A senior company executive told Business Standard 37 million sq ft was under development, of which one-third was due for delivery. "At its peak, the company had delivered area of around nine million sq ft annually four years ago," said Nagaraju Routhu, executive vice-president and head (human resource, information technology and corporate planning).
Unitech is not the only company that has failed to deliver residential units on time. According to estimates, 200,000-300,000 units are pending for delivery from all developers in the country because of the slowdown and a shortage of funds. That means 200-300 million sq ft is pending for delivery, assuming an average residential unit at 1,000 sq ft. The list of prominent developers defaulting on delivery includes DLF, Parsvnath and Emaar-MGF.
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Cutting debt
Although Unitech has started selling assets, it is not aiming to cut its debt with the proceeds, breaking with the the sector trend. It says it will use the money to speed up construction. To that end, it has also set up a 200-member in-house team, currently managing a fourth of its projects.
The developer has a debt of Rs 6,200 crore, which is manageable, officials said. Only if there's a surplus after spending on construction will it look at servicing debt, they said.
Sector leader DLF has been on a spree of selling non-core assets, including Amanresorts for $358 million (Rs 2,250 crore) recently, primarily to cut debt. DLF's net debt was Rs 17,400 crore as of the end of the third quarter of financial year 2014.
In contrast, Unitech's Nagaraju said for Unitech, there was nothing non-core. Since real estate is the core business of the company, buying and selling of assets will continue, senior executives said. That doesn't make anything non-core, they said.
