Thursday, March 5, 2009

Rs 300 Crores Lifeline Package For Emaar

The 2010 commonwealth games may be more than a year away, but time is running out for the government, especially when it comes to the marquee Games village for the athletes.

In a bid to stem delays, the government offers a Rs 300 crore lifeline to the private developer Emaar MGF that has run out of cash for the project.

The company reportedly has been seeking funding for the games village since December. Learnt from sources that the money would be given to the company as a soft loan. Although the exact terms and conditions of the debt agreement between the company and the government were not revealed, the interest rate is likely to be lower than open market rates.

Emaar MGF had first applied for a bailout in December but the request was turned down.

However, last month the parliamentary panel on commonwealth games expressed its displeasure at the delays in project execution, prompting the government to budge. Anshuman Magazine, CMD of South Asia, CBRE, said, “The government's move to offer funding may open the floodgates on similar requests.”

Perhaps Emaar MGF is low of funds because its planned share sale failed last year, with the economy slowing sharply, real estate prices halving from their peak and property sales slowing down.

But, almost all developers in the country are fighting a cash crunch. So, there may have been few takers for the project if the government were to re-tender it.

Meanwhile, for now, the only thing that may rescue the commonwealth games village that has already been drowning under other controversies, including environmental issues, may be a dose of government largesse.