HCC shelves housing project

Like HCC, most of the companies and builders feel that the slum rehabilitation project will be at a standstill without the governmentcoming out with some major incentives to the builders. Lok Group, another leading player, has been facing crash crunch like other construction companies. “We have shelved all our new projects due to severe cash crunch,” said a senior Lok Housing official.

The state government had announced free housing for 40 lakh slum dwellers on the assumption that private companies can be roped in by offering extra Floor Space Index (FSI) by resettling the slum dwellers and the developer could sell the additional property at the then prevailing rate. The real estate prices have crashed by 30 to 40 per cent in many parts of Mumbai and in some places it has crashed even further. Most of the builders are sitting on unsold property, facing severe liquidity crunch.

HCC, like many other builders who had drawn up slum rehabilitation scheme, has almost abandoned the Vikhroli project. “A severe slump in the real estate market has called for reassessment of the viability of the real estate project. The slum rehabilitationscheme in its present form is no longer viable and the revised scheme is yet to be announced by the government,” company sources said. HCC plan to develop a huge plot of 14 acre of land at Vikhroli is yet to take off.

One of the plots at Vikhroli east has been encroached upon by slum dwellers and HCC planned to be develop it under the slum development plan. The company wanted to sell 3.5 lakh square feet (part of a commercial complex) at Vikhroli West for Rs 142 crore and to develop 6.26 lakh square feet of slum land at Vikhroli East. The company also wanted to construct free housing for the slum dwellers free of cost at 0.55 million square feet and the remaining 1.45 million square feet was to be sold in the open market to finance the slum rehabilitation project. The project cost was estimated at Rs 98.2 crore and the first sale was planned for 1998-99.

“A conservative estimate put the gross realisation of Rs 157.5 crore from the project. However, a lot of investment was required for developing theproject. The long gestation period project was solely dependent on the government support,” company sources said. While the company was planning to raise Rs 30 crore by selling these projects by now, the company has to pay interest for the money borrowed for the project. HCC had raised Rs 100 crore from the market, part of it (Rs 20 crore) was to be used for the real estate projects. The financing plan is also upset as the plan was to get advance payment for the developed property from parties and use the same for completing the project.

“Some of the slum projects in South Mumbai may be still viable due to the high price differential existing. Most of the projects located beyond Grant Road are unviable as the property prices have come down from Rs 7000 per square feet when the plan was drawn up to Rs 30,000 per square feet now,” Gulabchand said. However, HCC has appointed a foreign consultancy to do a revised feasibility study of its commercial complex project at Vikhroli (West) sans the slum project.“We may construct an entertainment cum shopping complex including a big hotel at the Vikhroli plot. We may lease out some of the properties after developing it,” Gulabchand said.The state government had urged banks and financial institutions to treat slum development project as part of the infrastructure projects and lend liberally to them, but nobody had come forward. “The experience of South-east Asian countries where banks had to close down due to huge advances to real estate projects is deterring Indian banks from lending to the scheme,” banking sources said.