Housing Development & Infrastructure Ltd. fell to a record and Oberoi Realty
Ltd. dropped the most in two years as authorities intensify their clean up of India’s struggling property sector.
Bankruptcy proceedings will begin against HDIL
after creditor Bank of India filed an application, the developer said in a filing Tuesday, adding that it will appeal the decision. Separately, India’s tax office is investigating Oberoi Realty
on allegations of improper transactions and officials raided 30 locations across India related to the group, according to people with knowledge of the matter, who asked not to be identified as the information isn’t public.
The share slump highlights India’s intensifying demand slowdown. A series of economic shocks in the past three years, from the unexpected withdrawal of high-value rupee notes in 2016 to the sales tax introduced the following year, have dented property-market sentiment and caused funding for developers to dry up. In 2016, India introduced a law with strict punishments for building delays.
Tighter rules will ensure that good quality companies
survive the economic slowdown and the real estate clean up, said Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt.
Oberoi Realty’s Chairman and Managing Director Vikas Oberoi did not reply to text messages and couldn’t be reached on his mobile phone. The Economic Times
had earlier reported about the tax raids on the group. Its shares fell as much as 14 per cent in Mumbai on Wednesday, the biggest drop since November 2016. HDIL
fell by the 20 per cent daily limit to 8.8 rupees, headed for the lowest close since its debut in 2007.
An analysis of about 11,000 home builders by research firm Liases Foras in February showed that developers on average have to repay twice as much in debt each year as the income they generate that can be used to service it. This comes as property prices in India’s biggest cities are flagging -- home values in Mumbai sank 11 per cent last year following a 5 per cent decline in 2017.