Emaar Properties PJSC, Dubai’s biggest developer, has decided to end its 11-year-old joint venture with MGF Developments Ltd in India following a year-long separation tussle between the partners.
Emaar said in a statement on Wednesday it will take steps to reorganise Emaar MGF Land Ltd via a demerger to sharpen its focus on its Indian operations and develop ongoing projects.
The development comes almost a year after reports first surfaced about a possible split due to disagreement between the partners but Emaar had denied any such move. The Dubai developer had brought in about Rs 7,500 crore in the joint venture and owned roughly 49 per cent stake along with loans and guarantees while MGF held the remaining stake.
While Emaar didn’t disclose details of the demerger, media reports have suggested that the Dubai firm is likely to get a bigger share when the two partners split assets.
“They were in discussion to thrash out the various issues with regard to debt and partly completed projects that were stuck due to paucity of funds. It was a complicated process as it involves many running projects and large land parcels of about 7,500 acres spread over various cities in India,” The Economic Times reported citing a person familiar with the development.
Emaar MGF, formed in 2005, is known mainly for building the Commonwealth Games Village for athletes taking part in the event’s 2010 edition in New Delhi. However, it faced massive criticism for delays and poor construction quality. It also tried to float an initial public offering but couldn’t do so after the stock markets plunged following the global economic crisis in 2008. It made more attempts to launch an IPO in 2009 and 2010 but ultimately scrapped the plans.
Emaar is famous for developing the world’s tallest building, the Burj Khalifa, in Dubai. Headed by chairman Mohamed Ali Rashad Alabbar, Emaar has operations in 14 countries in the Middle East, North Africa, Asia and Europe.
MGF Development was started by Shravan Gupta in 1996. It claims to have delivered 2 million square feet of retail space and is developing about 3 million square feet of retail space and 1 million square feet of residential space.
Known for its retail assets at the time of forming the JV, MGF now has presence across residential, commercial and retail segments with projects in Gurgaon, Mohali, Jaipur, Indore and Hyderabad.
The joint venture was formed during the heyday of real estate when huge capital flowed in. But exits have been a pain point with some markets under the grip of a slowdown. The past two years have been particularly painful for developers as tepid forced them to look for various financing options to survive.
The national capital region, where the company has maximum exposure, has been worst hit by the slowdown with sales slipping significantly over the years. This has taken the unsold stock with developers to an alarming level.