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Thu 29 Jul 2010 12:11 PM

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Limitless waiting on refund from failed India project

But Dubai developer could lose millions as result of currency fluctuations.

Limitless waiting on refund from failed India project
DELAY: Limitless is still awaiting Indian government approval for the return of its investment in a failed joint venture project in India.

Dubai-based master developer Limitless is still awaiting Indian government approval for the return of its investment in a failed joint venture project in India, Arabian Business understands.

Limitless and New Delhi-based DLF Ltd, India's biggest real estate developer, each invested Rs 200 crore ($42.8m) into the development of a $12bn project in Bidadi in Southern India, which has since been scrapped.

However, under Indian foreign direct investment policy, Limitless must now secure Indian government approval for the early return of its funds.

The failure of the local Karnataka government to secure the land acquisition meant the Rs 400 crore was returned to DLF in April 2009. However, under Indian foreign direct investment policy overseas investors’ funds in Indian projects are locked in for a minimum of three years.

The Limitless and DLF joint venture has applied to the Indian government’s Foreign Investment Promotion Board (FIPB) and is awaiting approval for the return of Limitless’ Rs 200 crore 50 percent stake of the investment.

Sanjey Roy, vice president of corporate communications at DLF, told Arabian Business from New Delhi that he could not comment on the return of Limitless’ investment as “the application is with government.”

However, even if the FIPB application is successful, Limitless will take a hit of around $7.7m, or fifteen percent of its initial investment, due to the currency fluctuations of the Indian rupee since the project was launched.

A DLF source told The Economic Times newspaper in New Delhi this week that Limitless paid $50.5m when it transferred the initial stake of Rs 200 crore.

However, the source said that the stake was now likely to be worth around $42.8m and that Limitless would therefore suffer a $7.7m loss due to the failure of the project and the currency fluctuations since it made its investment.

The 9,178 acre project, was to be located 32km from Bangalore and was to consist of five integrated townships, office complexes, shopping malls and entertainment venues. Construction was due to start in first half of 2008 and had an expected completion date of 2016.

Limitless is part of state-owned conglomerate Dubai World, which is in negotiations with core lenders to restructure $23.5bn in debt. Earlier this month responsibility for Limitless’ operation was handed over to Nakheel, another indebted real estate firm scheduled to receive $8bn in cash from the government.

A spokesperson for Limitless declined to comment while the application is being considered by the Indian government.

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ExpatHog 10 years ago

Surely the highly paid experts hired by limitless had clauses inserted in the contract to cover currency fluctuations ?

karpaka_rajan_v_chettiar 10 years ago

limitless as a prudent investor would have hedged its foreign exchange investment against exchange fluctuations. if it had not; it was its discretion. and certainly they would have gone in detail into all sorts of eventualities and taken a calculated risk; . so the current situation should not be a surprise for them; i presume.