DLF, the country's biggest real estate company, may drop the plan to develop India's largest convention and exhibition complex in Delhi, sources say.
The move comes 18 months after the cash-strapped developer was allotted 35 acres by the Delhi Development Authority to build and maintain an international convention & exhibition centre, hotels and allied commercial facilities. The cost of the project is estimated at Rs 6,000 crore (Rs 60 billion) and was expected to be completed in three years.
The realty major has already spent Rs 900 crore (Rs 9 billion) on land purchase. The continuing liquidity crunch and delay in sourcing funds internationally have led DLF to review its plans to invest further in the project.
The company has spent over Rs 100 crore (Rs 1 billion) in finalising the project plan, identifying its technology partners and beginning the spadework for various projects. It has intimated its inability to complete the project unless the existing contractual obligations were renegotiated, according to DDA sources.
DLF is in talks with DDA to see if changes can be made to the original terms in the lease agreement, sources said. The lease agreement stipulates a time-bound completion of the project and has penalty clauses for every missed deadline. However, the agreement allows DLF and DDA to extend the timeframe for completing the project after mutual negotiation.
"DLF is looking at revising the contractual agreement that can even allow some equity participation from the government side,'' sources said. The agreement stipulates that the entire financial burden from the conceptual stage to execution is on the developer.
DLF declined to comment on the delay and status of the project though company insiders say the developer is not keen on the project. "The project has been killed,'' a source said. The lease deed allows DDA to take back the land if the developer fails to executive the project beyond a certain time.
The proposed convention centre is one of the most prestigious projects of DDA and was modeled on Suntec Convention Centre in Singapore and aimed at attracting tourists of the MICE (meetings, incentives, conferences and exhibitions) segment.
The conference centre has been designed to accommodate 12,000 delegates. In addition, the complex will house 25 meeting rooms of varying sizes with a total seating capacity of over 2,000 delegates for breakout sessions.
Debt papers downgraded by Crisil
DLF, the country's biggest real estate developer, had about Rs 1300 crore (Rs 13 billion) worth of debt papers, including pass through certificates downgraded by one notch by Crisil on slowing real estate sales which is contraining cash flows and will lead to problems on capital structure.
The company has been forced to increasingly rely on refinancing of its debt, Crisil said in a statement. The rating agency on January 28 downgraded the company's rating to A+ from AA- on slowing real estate sales and detoriorating external environment.