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– Kamal Narang

Mr K.P. Singh (right), Chairman, DLF, and Mr Ajay Shankar, Secretary, Department of Industrial Policy and Promotion, at the India Economic Summit 2008 in the Capital on Tuesday.

Our Bureau

New Delhi, Nov. 18 The Chairman of DLF Ltd, Mr K.P. Singh, on Tuesday said that weak demand for real estate due to high interest rates is leading to deferment of projects, including its own, and admitted that the company had even laid-off some employees.

“If demand is not there, the projects will close down… The demand is less because people have to take mortgage loans and if the interest cost is at 11-12 per cent, which should not be more than seven per cent, EMIs are higher,” Mr Singh told reporters on the sidelines of India Economic Summit here.

Asked specifically if DLF had been forced to defer some of its projects, he said: “We have deferred some projects…Yes…They are (in) hotel, residential and commercial space.”

To another query on whether the company had also resorted to lay-offs to cope with the current downturn, he said: “We must have laid-off employees somewhere, sure.”

Reacting to the Finance Minister’s statement earlier on Tuesday that real estate, among other sectors, should cut prices, Mr Singh said that decline in raw materials’ costs (cement and steel) would bring down realty prices, but emphasised that home loan rates — that were primarily responsible for the weak demand — should ideally come down to seven per cent.

Mr Singh refuted that realty prices were “inflated”. “It cannot be inflated. Today it is such a competitive economy and the whole economy has come down. So the concept of inflated prices is wrong. It is all about supply and demand. Today the demand has gone down so substantially that now lots of projects are getting closed down.”

“Today the interest costs are at 12-13 per cent… it should not be more than 8 to 9 per cent. In fact for mortgage home owners, the ideal rate is seven per cent,” he said, adding that inflation was no longer the issue and that the markets urgently needed to be flushed with more money.

The New Delhi-based developer had said recently that it did not plan to shed workers after net profit fell by four per cent in the three months to September 30, 2008, and the number of employees declined by 10 per cent during the quarter.

Higher loan rates, stricter lending norms at financial institutions and high property prices have hit demand for residential and commercial property in India, and realty companies are facing major cash crunch.

India’s second largest realty firm, Unitech, has recently said it is open to outright sale of its hotel projects.

“Unitech is in the business of developing properties and looks at monetising its real estate assets. We are evaluating a divestment of equity at both individual assets as well as a group of assets. Depending on the price, we will be looking at minority or majority or outright sale in these assets,” a Unitech spokesperson has said.

Unitech said it is proceeding with the hotel business as planned, and that six of its hotels are under construction.

More Stories on : Outlook | Real Estate & Construction | DLF Ltd

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