(Bloomberg) -- Housing Development & Infrastructure Ltd. fell to a record and Oberoi Realty Ltd. dropped 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 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 years, from the unexpected withdrawal of high- 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, whose shares dropped 2.5% in Mumbai on Wednesday. HDIL fell by the 20% daily limit to 8.8 rupees, 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 s in Mumbai sank 11% last year following a 5% decline in 2017.
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