The ongoing turmoil in the global financial landscape has cast a significant shadow over what is being regarded as India's largest real estate deal. BPTP Ltd, a prominent developer based in Delhi, initially banking on overseas institutions to help fund its acquisition of 94 acres of prime land in Noida at a staggering cost of Rs 5,006 crore, has now proceeded to seek an extension for the payment of the first installment of this substantial amount.
On March 12, the developer, led by entrepreneur Mr. Kabul Chawla, successfully secured the rights to develop the aforementioned land. The formal agreement required BPTP to settle its first installment, approximately Rs 1,251.5 crore (which constitutes 25% of the total bid amount of Rs 5,006 crore), within a strict timeframe of 30 days as mandated by the Noida authorities. However, as the deadline recently lapsed earlier this month, BPTP has formally requested an extension of 60 days for compliance.
Consequently, the company now has a 60-day window to make this payment, though it will also incur an additional interest charge of 14 percent on the overdue amount. A senior executive at BPTP confirmed that the extension request has indeed been granted, stating, "We will pay the money before the 60-day period ends." The executive, who preferred to remain anonymous, further revealed that BPTP was on the verge of finalizing a financial deal with several foreign banks to raise the necessary funds. Nevertheless, complications arose as the banks were entangled in the ongoing sub-prime crisis, leading to a significant overhaul in their management structure and consequently stalling the loan meant for BPTP.
The liquidity crunch has particularly affected India's real estate developers, especially those in the mid-sized category, more so since last year. Many developers are no longer able to access the external commercial borrowing avenues, and domestic borrowing costs have seen a drastic uptick due to a stringent monetary policy, which appears set to tighten even further in the days ahead.
Moreover, the stock market has not been forgiving, with real estate stocks experiencing a notable decline from their recently achieved highs. Alternatives for funding, such as the London Stock Exchange's Alternative Investment Market or the prospect of listing real estate investment trusts internationally, are similarly unfathomable given the prevailing market conditions.
The tender won by BPTP, succeeding over larger competitors like DLF and Omaxe, included an "exception clause" that permitted the company to request this extension for the initial payment. It is worth noting that any failure to remit the payment within the newly extended period would result in the cancellation of the award, accompanied by the announcement of a fresh tender, as outlined by officials from Noida. Furthermore, the earnest money, totaling Rs 100 crore, would also be forfeited under such circumstances. For context, BPTP Ltd posted a turnover of approximately Rs 1,100 crore and a net profit of Rs 220 crore in the financial year 2007-08.