New Delhi: After five years of robust growth till the middle of 2008, the $14 billion Indian realty industry faced a major crisis this year, not just because of a sharp fall in demand but due also to high cost of credit in executing ongoing projects.

The same set of realtors who were happy hiking the cost of both residential and commercial project three-four fold in the past years were forced to launch low-cost ventures and reduce prices.

Even the big players like DLF and Unitech had to mop up funds through qualified institutional placements to feed their cash-starved enterprises - most of it to retire old debts and fund new projects.

The city-based real estate developer BPTP even had to surrender the biggest ever land deal in India worth Rs.5,006 crore ($1 billion) that was clinched in 2008 at Noida in the outskirts of New Delhi as it was unable to make the payment.

"It was definitely a tough year for the realty sector, mainly because of the global crisis," said Pradeep Jain, chairman of Parsvnath Developers. "But strong fundamentals helped us overcome it to some extent," Jain told IANS.

According to data compiled by leading brokerage and research firm SMC Capital, some Rs.10,300 crore (more than $2 billion) was mobilised by realty firms such as DLF, Unitech and Indiabulls in the first half of 2009 through private placements.

This apart, over 15 players such as Emaar MGF, Lodha Developers and Sahara Prime City are set to come up with initial public offerings to raise about Rs.15,000 crore ($1.8 billion) to tide over their funds crisis.

Among them, Delhi-based Emaar MGF Land alone proposes to raise Rs.3,850 crore ($770 million), while Sahara is targeting Rs.3,450 crore ($690 million). Lodha Developers have targeted Rs.3,000 crore ($600 million) and Godrej Properties want to raise Rs.600 crore ($12 million).

Emaaar MGF, in fact, has filed its prospectus with the markets watchdog, the Securities and Exchange Board of India (SEBI), for the second time, after calling off its offer in February 2008 because of a falling stock market.

The woes of the realty sector also showed on the stock markets, where for the first half of the year the sector-specific index was languishing and was quoting well below the gains by the benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE).

As the year draws to a close, it has regained momentum in sync with the broader market and the realty index is now quoting 75.11 percent above the levels seen on Dec 26 last year.

"The realty index under-performed for a larger part of the year. As this industry is sensitive to interest rates and credit, investors were cautious in trading on the shares of realty firms," said SMC vice-president Rajesh Jain.

Added Ajit Krishnan, partner with consultancy and accounting major Ernst and Young: There was a 20-22 percent decline in demand for realty projects. The belief that real estate prices can't go down any further was also erased with drastic correction in prices.

Yet, as the year draws to a close, realty industry is optimistic over the prospects in the New Year and believes it would pay to remain focused on low-cost housing projects.

But analysts fear that the rising inflation may trigger a rise in interest rate. As a result, real estate players could once again be seen grasping for breath in 2010 as well, especially while seeking funds for their projects.

SMC Global Vice-President Rajesh Jain said that rising inflation is an area of concern. If inflation continues its upward march, the Reserve Bank may tighten the money supply, which would hit the sector hard.

"The year 2010 will be a buoyant one. But it would not be so euphoric as 2007. There would be genuine buyers, but no speculative investments," said Ansal API spokesperson Kunal Banerjee.

"Affordable housing will be the mantra for 2010."

And there are already signs of such predictions. The Tata Group's housing arm is investing in a 1,200-unit township at Boisar, on the outskirts of Mumbai, to offer apartments at prices ranging between Rs.390,000 and Rs.670,000.

Similar plans are on for 15,000 low-cost homes over the next four years across several cities, including Mumbai, Delhi and Bangalore, joining a host of other developers like Jaypee and Vipul who are catering to the low-to-middle income segment.

Property consultancy Knight Frank, in fact says, says 367,000 such housing units will be available by 2011, mainly two-three bedroom units, which were the main areas of focus till a few years ago.

"As real estate sector's growth continues to improve, the country will witness a supply of 138,000 residential units in 2010, which is 57 percent more than the supply seen in 2009 mainly at Hyderabsd, Pune, Bangalore, Chennai and Kolkata."

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