Unitech and Ansal Properties & Infrastructure are among the country’s real estate companies most at risk of collapsing due to rising debt and a drop in sales, Kim Eng Research said.Indian developers’ debt, including advances from customers, rose 55 per cent in the year ended March 31, 2008, as the companies increased their land banks. The developers may now miss delivery schedules as demand slows.

“With weakening property demand and a difficult business environment, we believe bankruptcy risk is rising for listed property companies in India,” the analysts said, based on a study of 15 publicly-traded developers which represent 90 per cent of the industry’s market capitalisation.

Investors have shunned Indian property stocks this year as borrowing costs climbed, curbing demand for new homes, while the global recession curtailed new financing for developers. The Bombay Stock Exchange Realty Index has plunged 83 per cent this year, compared with a 52 per cent drop in India’s benchmark Sensitive Index.

“We are more than solvent, have enough assets and a business plan in place,” Sanjay Chandra, managing director of Unitech, said from Gurgaon. “We have a debt equity ratio of 1.75, which has declined from 2 in the earlier quarter. We expect the debt-equity ratio to decline to about 1 as we sell more assets.”

DLF, India’s biggest developer, and Housing Development & Infrastructure are the least at risk, according to the Altman Z-score model used to assess bankruptcy risk, Kim Eng said.

“It’s an absolutely incorrect analysis as our debt-equity ratio is about one,” New Delhi-based Ansal’s Chief Executive Officer Anil Kumar said by telephone today. “We have about Rs 40 crore surplus cash and banks are lending to us. We have not bid for any land and have no pending payments anywhere.”

The government may have to step in as the nation doesn’t have formal bankruptcy courts, analysts said in their note.

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