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Six infotech special economic zone projects of the Unitech Group, which owns the country's second-biggest real estate company, have been delayed by as much as three years owing to slowing demand and delays in government approvals, sources said.
Alternative Investment Market-listed Unitech Corporate Parks owns 60 per cent each in these projects. The group plans to develop 16 million square feet of space under the projects.
Unitech Corporate Parks had raised pound 360 million through AIM in December 2006, and has invested pound 317 million in these SEZs.
"No realty company would want its funds to be stuck in SEZs, especially now when markets are in bad shape," a source in the company said, declining to be named. "We will rush the projects as and when demand picks up."
Admitting the delay, a company spokesperson said: "Yes, there has been a delay in these projects with respect to the original schedule envisaged at the time of the listing of Unitech Corporate Parks Plc."
The approvals for these projects came at the end of last year or early this year, delaying the start of the projects, according to the company official.
"That schedule was prepared assuming that the SEZ and other approvals from the government would come in a certain time frame. However, there was a delay in getting SEZ approvals because the government suspended the approval process during the period when they were reviewing the SEZ policy," he added.
"These projects have now been notified as SEZs and construction is in progress at all these sites," the spokesperson said without specifying a schedule for completing the projects. "In fact, G2 and K1 have already started generating rental income. There is no debt in any of these projects."
Falling demand is , however, likely to hit these projects. The government has notified nearly 260 IT SEZs as of September 2008, implying at least 65 million square feet of additional supply in the next two years.
A slump in demand for outsourcing is expected to restrict the additional supply of IT-related SEZ space to 1 million square feet in the next three years, analysts said.
"Our channel checks indicate that due to the weak demand environment, only 25 to 30 per cent of the projects have begun construction work. We expect developers to shelve most SEZ projects for lack of funds," BNP Paribas Securities said in a recent report.
Real estate developers are also facing an acute liquidity crunch with property sales dropping 60 per cent from the beginning of the year. Demand for office space has also slumped as companies defer expansion plans.
Unitech, the country's second largest property company by market value, is raising Rs 2,500 crore (Rs 25 billion) by January by selling of hotels and commercial space and transferring Rs 1,200 crore (Rs 12 billion) debt to its telecom joint venture, Unitech chairman Ramesh Chandra said recently.
Unitech has plans to sell three of its projects that are nearing completion. The company is in the final stages of selling its Courtyard by Marriot, the 199-room budget hotel in Gurgaon, and 225,000 sq feet of space in Saket, Delhi, before January.
