UPDATE 2-St Modwen loss widens as prices fall, sees better H2

* Scraps interim dividend

* Says fall in comm property values in H2 not to be harsh

* Sees returning to growth by end-2010

* H1 pretax loss 98.3 mln stg vs yr-ago loss 20 mln stg

* Shares fall 1.8 pct

(Recasts, adds CEO, analyst comments, share movement)

By Kumar Alagappan

BANGALORE, July 6 (Reuters) - St Modwen Properties Plc (SMP.L) scrapped its interim dividend as first-half loss widened, hurt by significantly lower property prices, but said the worst was over and expected to return to growth by end-2010.

The British real estate developer said it expected further reductions in the commercial property values in the second half but they might be less severe, even as the residential market was beginning to show early signs of improvement.