‘We intend to invest ₹5,000 crore in new projects over next two years’
PIROJSHA GODREJ, executive chairman, Godrej Properties
BENGALURU: Property developer Godrej Properties Ltd (GPL) plans to use the ongoing slowdown in the real estate sector to scale up its business and consolidate market share. After clocking good booking volumes in 2018-19, the Mumbai-based developer raised ₹2,100 crore earlier this year through a qualified institutional placement (QIP). In a telephonic interview, Pirojsha Godrej, executive chairman of Godrej Properties, talked about the impact of the liquidity stress in non-banking financial companies (NBFC), the company’s growth and investment strategy, the iconic RK Studios project launch and affordable housing. Edited excerpts:
How has the ongoing NBFC liquidity crisis impacted real estate firms?
The impact has clearly been quite bad. Not that the situation was good before this, but this crisis has worsened the liquidity environment for the real estate sector. In yet another way, the NBFC crisis also further pushed consolidation in the sector, for anyone who doesn’t have the ability to raise money or a strong balance sheet and no access to capital. Companies who are well-placed are therefore at an advantage over the others.
Five years into the real estate slowdown, how has the consolidation story played out in the residential sector?
In terms of strong balance sheets and sales numbers, there are the top 5-10 developers who have significantly grown in the last five years, and it is a good opportunity to gain market share compared to other developers. We see a big opportunity in the current situation to gain market share, take on new projects and scale-up.
GPL has considerably expanded its portfolio as distress deepened during these slowdown years. What kind of opportunities do you see now?
Despite the pessimism, as we add new projects and enter new micro-markets in large cities and deepen our presence, our market share will rise in the short-term. With the sector undergoing challenging times, we saw huge opportunities and needed to be well-capitalized. The equity raised through the QIP was well-timed to take advantage of a counter-cyclical investment strategy and strengthen our business development pipeline. We intend to invest ₹5,000 crore in the next two years, through a combination of equity and debt, in new projects.
Given that the residential sector is still under stress, what kind of homes are selling today?
It’s evident that smaller units and more affordable projects have sold better than luxury homes. But sales are also dependent on the right product for a certain micro-market. If customers today perceive any risk associated with the developers or in under-construction projects, they will stay away. Developers who have a good track record and better credibility are better positioned in the current market. For instance, our premium project launches have also done well.