Unitech's Santacruz Project Scaled Down

If there is ample money and good valuation in the private sector, as opposed to the public markets, why has Unitech's Santacruz Koliwada project scaled down half to 1 million sq ft?

Sanjay Chandra, Unitech's managing director said in a CNBC interview, that there was better valuations for real estate in the private equity segment than public markets. This comes at a time when after much dithering, Lehman has agreed to invest Rs 750 crore in to Unitech's Santacruz Koliwada project in Mumbai.

What has gone unnoticed is that Unitech has cut back the size of the project by 50 percent. The original deal between Unitech, Lehman and then Deutsche Bank, was valued at Rs 2,000 crore for 2 million sq ft, for which Unitech had already invested Rs 500 crore. This works out to be Rs 10,000 per sq ft for land and construction. Lehman and Deutsche Bank were expected to get a minority stakes each in the project for bringing in together Rs 1500 crore.

Due to the conditions in the marketplace, as well as Lehman's own problems in the US, the project appears to have been scaled down to 1 million sq ft. In this Lehman has infused Rs 750 crore, the same amount of money it had committed for the original plan, but has taken in a 50% stake in the SPV. Deutsche Bank had earlier backed out of the deal.

So, why is Unitech not getting another private equity fund to finance the balance 1 million sq ft. Several stories are being fed in to the media that Lehman may invest $700 million in other projects by Unitech. This seems a bit contradictory.

Read the CNBC interview here

Video here

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