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India’s Unitech to sell property to meet repayments

Unitech, the country's second largest listed real estate company, is putting all six of its hotel projects under construction at Gurgaon and Kolksata up for sale, a spokesman confirmed.

'We are going to sell some of our non-residential properties in the coming months to be able to meet our repayment obligations,' R. Nagaraju said. Because of the credit crunch it needs to reduce capital expenditure and raise cash to fund other on-going projects.

'We are looking at divesting up to 100% stake in all six properties, comprising 1,000 rooms. We are also talking to a few private equity funds but a deal hasn't been clinched yet,' he added.

The company has also scaled down its targets for its hotel business. Instead of 15 hotels with 2,500 rooms as planned earlier, Unitech has decided not to go beyond the 1,000-room capacity.

It still plans to open its first hotel in January 2009, a 199-room mid-market property, which will be managed by Marriott and sport the 'Courtyard' brand. Another two hotels, for which the company has management tie-ups with the Marriott and Carlson chains, will be ready in 18 months.

The company expected to raise $350 million through private equity in the current fiscal year for its hotel business. The global financial turmoil, however, has made fund-raising difficult for real estate firms.

Throughout the property industry in India developers are having financing problems. With equity as well as loans becoming increasingly difficult to obtain, a capital-intensive business like hospitality has taken a backseat for developers.

India's other big developer DLF has already shifted its focus from hotel and mall business to other segments where revenue realisation is quicker and easier.