* Exec says seeing early signs of improvement in business (Adds details)

MUMBAI Feb 14 (Reuters) - Unitech Ltd, India's No.3 real estate developer by market value, reported a halving of its quarterly net profit on Tuesday, as the company was hit by a fall in demand for houses in a rising interest rate environment.

India's debt-laden developers have been hit by slowing sales as 13 interest rate hikes since March 2010 by the central bank in Asia's third-largest economy have increased the cost of repayments and deterred potential homebuyers.

"Business environment remained challenging during the quarter affecting the company's ability to scale up the construction activity," Unitech managing director Ajay Chandra said in a statement.

"Towards the end of the quarter, though, there have been some early signs of improvement in the environment," he said, adding the company's immediate priority is to increase the construction activity at its project sites.

Unitech, which builds houses as well as commercial and retail properties, reported a 50 percent drop in net profit to 552 million rupees ($11.2 million) for the quarter ended Dec. 31 compared with 1.1 billion rupees a year earlier.

Net sales were down 22 percent at 5.14 billion rupees.

Analysts on average had forecast a net profit of 1.17 billion rupees on sales of 6.66 billion rupees, according to Thomson Reuters I/B/E/S.

Unitech also holds a minority stake in a telecoms joint venture with Norway's Telenor.

Unitech's managing director Sanjay Chandra and the telecoms joint venture are among 19 people and six companies charged by the police in a massive telecoms licensing scandal. All accused in the telecoms case have denied any wrongdoing.

Shares in Unitech, which is valued at around $1.6 billion, closed 0.7 percent higher on Tuesday at 29.75 rupees, before the company's results were announced. The main Bombay Stock Exchange index closed 0.4 percent higher.

The company's share price plunged 71 percent in 2011 underperforming the wider BSE Realty index that lost 52 percent last year and the main index that fell nearly 25 percent. ($1=49.2 rupees) (Reporting by Aditi Shah; Editing by Jon Loades-Carter)

• A Permanent Economic Emergency