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03 Apr 2017

Unitech, a cautionary tale for the real estate sector

Unitech,  poster boy of failing realty sector

Delhi Police's Economic Offences Wing currently has Unitech's MDs Sanjay and Ajay Chandra in its custody for money laundering and duping its consumers.

Although, it's yet to be seen what twists and turns await as the case proceeds, it is for certain the real estate player will not comeback anytime soon.

Unitech fall from grace, is a cautionary tale that unfolded over the years.

In context

Unitech, poster boy of failing realty sector
Reality hits the realty sector in its guts


Reality hits the realty sector in its guts

For a sector which depends mainly on the banks and consumer demands, delays are something that is frowned upon.

Reportedly, 17,000 buyers still wait for the houses that they paid for and never got. Unitech, which was already on its knees thanks to the the 2008 economic crisis, is now riddled with court cases while it scurries to complete its due projects.


Demonetization will take a bite right off

There are two ways that Unitech can get out of this mess.

Raise money and finish the projects or reimburse its buyers with penalty.

Thanks to demonetization, the chances of raising money via new projects are really slim.

As for reimbursement, with the firm on the verge of becoming a penny stock, that may not be possible without insolvency.

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Unitech's valuation is spiraling down to a bottomless pit


Unitech's valuation is spiraling down to a bottomless pit

Unitech's market capitalization is a paltry Rs. 1,457.28 crore from its valuation of Rs. 20,705.41 crore on 2010 marking a fall of almost 92.96%.

The stocks have plummeted from the high of Rs. 84.90 in 2010 to a mere Rs. 5.57, that is fall of almost 92.44%

As of September 2016, Unitech's debt stands at a staggering Rs. 5,818 crore.


It's a fire sale, therefore, everything must go

In a bid to raise money, Unitech, has been dissolving chunks of its land bank and putting it up for sale.

Owing to demonetization and other factors it has managed to sell only 11.55 acres in Gurugram for Rs. 55 crore and 19.5 acres in Chennai for Rs. 66.86 crore during the April-December period.

Where is all the money they took from investors?

2G scam

Where is all the money they took from investors?

This is not the first rodeo for MD of Unitech, Sanjay Chandra.

He is one of the prime accused in the infamous 2G scam and had allegedly colluded with former Telecom minister A. Raja to apply for telecom licences.

Crime doesn't pay and his investments (read bribes) failed to work and Unitech which was already reeling from a realty crisis ended up bleeding dry.


Buckle up realty sector, its choppy waters from now on

It maybe incidental or accidental but Unitech's plight should be taken as a wakeup call.

The loss of credibility that the events have evoked would now prevent buyers, which the sector desperately needs to fix the effect of demonetization.

The NDA government is also likely to make an example out of Unitech post budget, where it took a strict stance against defaulters and evaders.

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