Date:28/11/2009 URL: http://www.thehindubusinessline.com/2009/11/28/stories/2009112852200300.htm

Back Omaxe to exit 2 luxury projects in Dubai

Our Bureau

New Delhi, Nov. 27

Omaxe Construction Ltd on Friday said that it will exit two super luxury residential projects in Dubai.

It also plans to approach Dubai's Nakheel seeking refund of the first instalment of Rs 50 crore, paid towards acquisition of land for the two projects. Omaxe said it is yet to get possession of land from Nakheel PJSC for the projects.

The other real estate developers – Unitech and DLF – said that they have no exposure to the Dubai market. But analysts say that the Dubai crisis has come at a time when the markets were just about starting to recover from the global financial crunch triggered by the US housing market slump.

Analysts believe that the fear of debt default could suck out liquidity from the realty market.

“This is bad news for the industry…It can lead to tremendous liquidity pressures for the real estate sector, despite the strong residential demand. Any further curb on lending will be a problem,” said Mr Sanjay Verma, Executive Managing Director, South Asia, Cushman & Wakefield.

He said that if Dubai's debt woes turn out to be larger than anticipated, it could have a severe impact on funding and execution of projects across markets, which in turn will hit consumer sentiments, demand and ultimately the real estate prices.

Omaxe, meanwhile, said that it will invoke specific clauses in its agreement for the refund on Dubai projects. "Nakheel has put the projects on hold indefinitely. We will be seeking refund of about Rs 50 crore," said Mr Rohtas Goel, Chairman and Managing Director, of Omaxe said.

The company said that the total land value of the projects were was pegged at Rs 400 crore (of which over 10 per cent was paid towards the first instalment). The total cost of the project was estimated at Rs 1,600 crore, with the sale value estimated at Rs 2,850 crore.

Amid investor fears on company's exposure in the troubled market of Dubai, shares of Omaxe shares fell as much as 2.2 per cent on the BSE on Friday to Rs 93.25 per share.