Sub-prime shadow on Indian realty

The turmoil in the global financial markets has cast its shadow on India’s largest real estate deal.

Delhi-based developer BPTP Ltd, which was banking on overseas institutions to fund the acquisition of 94 acres of prime land at Noida for Rs 5,006 crore, has sought an extension to pay the first instalment of the money.

On March 12, BPTP Ltd, promoted by entrepreneur Kabul Chawla, had bagged the rights to develop the land.

The deal required it to pay the first instalment of around Rs 1,251.5 crore (25 per cent of the bid amount of Rs 5,006 crore) to the Noida authorities within 30 days. That deadline expired earlier this month and the company has now sought a 60-day extension.

It now has 60 days to pay the amount with an additional 14 per cent interest impost. The extension request has been granted, said a senior BPTP executive. “We will pay the money before the 60-day period ends,” he added.

The executive, who requested anonymity, added that BPTP had almost closed a deal with some foreign banks to raise the required money. But the banks, caught in the sub-prime crisis, went through a management overhaul and the loan to BPTP got stuck.

India’s real estate developers, especially the mid-sized ones, have been facing a liquidity crunch since last year. Developers can no longer tap the external commercial borrowing route, while domestic borrowing costs have gone up on account of tight-fisted monetary policy, which is likely to harden further in days to come.