Trump Tower builder dumps luxury for cheap homes as India slows

Mumbai

A TRUMP Tower developer in Mumbai, India's financial hub, is shifting focus to cheaper apartments and office space as a credit squeeze crimps demand for posh properties.

Macrotech Developers, earlier known as Lodha Developers, will cut the share of premium housing from its portfolio to about 17 per cent from 30 per cent, said its managing director Abhishek Lodha.

It is also looking to increase contributions from so-called affordable housing to about 50 per cent of revenue over the next three to four years, from 40 per cent currently.

"All our new investment is going in affordable and office," Mr Lodha said in an interview at the company's premium World Towers residential project in Mumbai. "We are managing our liquidity very carefully. It is something which we need to watch more carefully now than we would even 18 months ago."

India's real estate market has been battered over the past three years by a series of policies from Prime Minister Narendra Modi's government and more recently by a collapse in lending by non-bank financial companies.

While unsold premium homes pile up across the country, builders are relying on Mr Modi's home-for-all push to keep demand for budget apartments robust even as the broader economy decelerates.

The cash crunch comes months before Macrotech is due to repay a US$325 million denominated bond it had raised to develop two premium residential properties in London.

Rating companies downgraded the company's ratings twice this year citing weak sales and liquidity and its narrowing refinancing options.

One London project is complete, the other will be completed in the next six months, and the cash flows will help repay the bond, Mr Lodha said. At least until then, he does not expect to divest any more stakes to private equity firms after earlier selling 28 per cent of the company's holding. "We are well on track to make the arrangements to make the payment in March 2020," Mr Lodha said, declining to share details.

In India, Macrotech's smaller peers are struggling to survive. To help combat the downturn, Mr Lodha recently started a new business line that would offer apartments as low as 2.5 million rupees (S$48,000) each.

Authorities must do more to improve demand, and that includes lowering borrowing costs in an economy where mortgage rates are above 8 per cent despite the central bank reducing its policy rate to 5.15 per cent and inflation running at about 4 per cent, Mr Lodha said.

He also plans to boost the share of Macrotech's rent-yielding portfolio and list it as a real estate investment trust in the next two to three years. India can raise more than US$25 billion through real estate investment trusts over this period, Anarock estimates.

The company has sold almost 80 per cent of the apartments in the 78-storey Trump Tower that it is developing in south Mumbai. The luxury homes - priced at 75 million rupees or more - will be handed over to buyers starting in December, Mr Lodha said.

Mr Lodha, the 39-year-old son of Macrotech's founder, said the three-decade-old company has seen sales rise 6 per cent in the first half of the financial year that started in April. That's somewhere in the middle when compared to its historical performance, he said. "I would not say I am happy but we are okay," he said. "It's a tough time, but it's not an insurmountable situation." BLOOMBERG