Unitech Secures $300 Million from International Fund
Boost to Residential Projects Amidst Liquidity Crunch
Unitech International Real Estate Fund has successfully raised $300 million, slated for deployment in Unitech’s residential projects across India. This influx of capital is expected to provide a much-needed lifeline to the country’s second-largest listed developer, navigating the prevailing liquidity crunch impacting the real estate sector.
Investor Profile
According to a senior Unitech executive, who wished to remain anonymous, the fund has attracted investments from a diverse set of international stakeholders, including:
- A European pension fund
- A Japanese bank
- Several Europe-based High Net Worth Individuals (HNIs)
Unitech International Real Estate Fund: An Independent Entity
Modeled after Unitech Corporate Park (UCP), an AIM-listed entity overseeing Unitech’s IT parks, this fund operates independently. Unitech Realty Advisors, the asset management arm of Unitech, will provide strategic guidance on the fund’s deployment over its 10-year horizon.
Strategic Deployment
The entire $300 million corpus is earmarked for Unitech’s residential projects, spread across various locations in India. The deployment is anticipated to occur within the next few months, offering a timely boost to these projects.
Context: Real Estate Sector Challenges
The residential segment of the Indian real estate market is facing unprecedented challenges, with housing sales plummeting by up to 80% in most markets. This downturn has resulted in a severe cash crunch for developers, who typically rely on the self-finance model, where advance payments from home buyers fund project developments.
Market Impact
- Unitech’s Shares: Reached a 52-week low of Rs 135.10 on BSE on July 16, closing at Rs 137, down 11% from the previous close. The company has witnessed a significant decline of almost 75% since its January peak.
- DLF’s Performance: The country’s largest realty developer has also been affected, prompting a share buyback announcement after its scrip dipped to Rs 350 on July 2, marking a 71% decline this year.
Analyst Insights
Leading analysts have consistently downgraded the real estate sector, citing rising inflation, interest rates, and sluggish demand. Notably, Credit Suisse has adjusted its ratings for DLF from ‘neutral’ to ‘underperform’ and for Unitech from a higher stance to ‘neutral’.