GST AND RERA HAVE CREATED UNCERTAINTY: PIROJSHA GODREJ
Real estate developers are grappling with the introduction of both the Real Estate Regulation & Development Act (Rera) and GST. However, Godrej group’s real estate arm Godrej Properties has been adding new projects though overall launches have come down sharply in the sector. PIROJSHA GODREJ, executive chairman of Godrej Properties, discusses the impact of the GST and Rera on the company’s sales and operations, in an interview with Raghavendra Kamath. Edited excerpts:
How has the introduction of the GST impacted Godrej Properties?
It is too short a time to accurately determine the impact of the GST on the sector. That said, the combination of the GST and Rera has created short-term uncertainty, but we believe both will help strengthen the demand environment going forward. The GST is likely to provide a significant boost to economic growth and Rera will increase consumer confidence. That combination is likely to be very positive for the real estate sector.
How compliant is your company when it comes to Rera?
In Maharashtra, where the Rera mechanism is in place, we have almost completed the registration process for all our projects and in other states, where their mechanisms are still not finalised, we are ready to register.
Developers say both the GST and Rera will push up the costs. What is your take on that?
It will take time for buyers to understand the regulatory changes. Costs may go up, but there will also be benefits to the industry as economic growth and consumer confidence improve. Some of these costs have to be absorbed, but when demand starts improving, prices can go up.
Many developers are saying that they are not launching new projects as they are busy registering under Rera and battling slowdown in sales. But you have acquired land parcels and launched new projects...
We believe that a counter cyclical investment strategy is beneficial in a long-gestation for the real estate sector. It makes sense to buy and invest in land parcels and projects when there is confusion in the market and when valuations are, therefore, reasonable. Real estate is a cyclical business. It does have significant down cycles but it will also have good times. We believe it is a great time to strengthen our development portfolio across our key focus markets. We have also seen a
WE ARE NOT OVERLY WORRIED ABOUT THE STOCK GOING UP OR DOWN FOR A COUPLE OF MONTHS. WE ARE HERE TO CREATE LONG-TERM VALUE. ANALYSTS WILL HAVE THEIR OWN OPINIONS AND WE WELCOME HEARING DIFFERENT OPINIONS AS IT HELPS US FURTHER STRENGTHEN OUR STRATEGY”
tremendous response to all our new project launches, which further enhances our confidence in this strategy.
How have bookings been in the past few months?
Our residential sales bookings have been very strong so far this financial year. We have launched four new projects and have also seen good momentum in sales from our existing residential projects.
Recently, Morgan Stanley downgraded your stock, saying the leverage is on the higher side and the stock is running up sharply. Your comment.
The report moved our rating to neutral because they believed the significant appreciation in our stock price over the past few months might result in a consolidation phase. Other analysts have recently upgraded their recommendations. We are not overly worried about the stock going up or down for a couple of months. We are here to create long-term value. Analysts will have their own opinions and we welcome hearing different opinions as it helps us further strengthen our strategy.
Godrej Properties has largely stayed away from affordable housing. Is it a deliberate strategy?
We have many projects that qualify for affordable housing as per the government’s new definition. We expect to launch several projects in this category in the coming years.
You had committed to make all new projects green buildings. What is the update?
In 2011, we committed that all our new projects would be green buildings and would be certified by independent third-party agencies. We are a part of the Sustainable Housing Leadership Consortium, which seeks to work with all stake holders to increase the trajectory of adoption of green housing in the country. Green buildings provide our customers many benefits — operating costs for electricity and water are considerably reduced. Our customers also live in a healthier location, which helps improve their well being. We are fully committed to doing everything we can to promote the green building initiative in India. We do this with focus on things like the use of sustainable materials and the proper planning of projects to ensure sustainability is maximised through the reduction of heat gain and the conservation of water.