Property developers, who are hit by the credit crunch, are planning to downsize staff, reduce salaries, shun hikes in a bid to tackle the slowdown in the property sector, where sales have halved from the beginning of this year due to high interest rates.
Parsvnath Developers is expected to sack its non-performing staff post Diwali as part of its cost cutting measures. "Non performers have to go. Cost cutting measures will start in 15 to 20 days,'' said Pradeep Jain, chairman of Parsvnath, told reporters on the sidelines of a conference in New Delhi today.
Parsvnath currently employs 1,400 people and nearly 30,000 are indirectly employed, Jain said, adding that the company will cut 15 to 20 per cent salaries of some of the executive as part of rationalising salary levels. "Last year some of the executives got hikes of 120 per cent. But this year we will rationalise that,'' Jain said.
He, however, did not specify the number of people who will be retrenched, saying that the company is yet to identify non-performers. Blaming poor property sales, Jain said Diwali sales have gone down between 45-50 per cent.
Unitech, the country's second largest property firm, has decided not to give hikes during this Diwali. "Last year we had given 28 per cent salary hike on a half yearly basis.This year we have given only one hike of 15 per cent and this Diwali there would be any hike,'' said, sanjay Chandra, managing director, Unitech. Recently, there were reports of DLF, the country's largest property company, sacking 300 employees which company has denied.
Analysts said that property developers are resorting to all measures to save money when funds have dried up.
"The construction work of many of their ongoing projects has stopped due to lack of funds. The developers will have to rationalise their expenses,'' said Sanjay Verma, executive managing director of property consultancy Cushman & Wakefield.
Apart from sharp decline in sales, banks have stopped lending to developers due to tight liquidity scenario in the country and abroad, due to which developers are struggling to meet their working capital requirements. Many of the developers are borrowing at rates of 20-35 per cent to meet their requirements.
"Industry is going through a recession and launches are delayed. They are cutting jobs and salaries to improve cash flows,'' said an analyst from Mumbai-based brokerage.
