Some big real estate developers are eyeing options to diversify into unrelated areas such as coal mining, irrigation projects, transmission lines and other infrastructure projects to beat the slowdown in the sector, according to a survey conducted by a trade body.The diversification into telecommunication and other infrastructure-related projects is being weighed by the cash-rich companies, a survey conducted among a sample size of 64 representatives by Ficci on “Impact of global financial crisis on Indian Real Estate Market’’ revealed.

The report, however, did not give more details on the subject.

Still, Ficci demanded that real estate companies should be allowed to access External Commercial Borrowings (ECBs) for construction funds with some restriction in terms of average maturity to beat the slowdown and overcome financial crunch.

Several real estate companies are short of funds as credit crisis has forced banks, private equity investors, overseas funds and individual investors to turn risk-averse. The shortage of funds, coupled with slowing demand, has halted several ongoing projects.

Private equity investors now prefer to invest in specific real estate projects instead of realty companies, the survey revealed.

“Due to adverse market conditions and the ongoing financial crisis, investors expect the internal rate of return (IRR) of more than 20 per cent from Indian real estate projects,” Ficci said in its report.

Developers are trying new strategies, including stamp duty waiver and joint ventures, with other rival developers, the survey said.

Real estate companies want the government to relax the limitations of Press Note 2 in terms of project criteria and allow smaller projects to access capital as well, the survey revealed.

Among the other issue needed to be resolved by the government including setting up of title verification agencies for land deeds, making land records transparent by putting them online, sale of additional urban land at reasonable prices, tax benefits to developers undertaking affordable housing projects and also expanding the scope of concessional interest rate scheme to Rs 30 lakh borrowers.

The Ficci study also demanded that the government should check speculation in land prices and exercise control on end-use of land. It urged the authorities to bring in stricter laws for defaulting developers to boost confidence of consumers.

Popularity: 23% [?]