HT Estates

As inventory levels are reducing, turnaround is expected to happen soon: Pirojsha Godrej

- Madhurima Nandy

BENGALURU: Real estate firm Godrej Properties Ltd (GPL) plans to use the ongoing struggle and slowdownin­therealest­atesector as an opportunit­y to scale up its business andconsoli­date market share.

The last financial year was a breakout year for the Mumbaibase­ddeveloper, in termsofsal­es booking volume. Earlier this year, it raised ₹ 2100 crore through aqualified institutio­nal placement (QIP). In a telephonic interview, Pirojsha Godrej, executive chairmanof­GodrejProp­erties, spokeabout­theimpacto­fthe liquidity stress in non-banking financial companies(NBFC), the company’s growth and investment­strategy, the iconic RKStudios project launch and affordable housing. Edited excerpts: Pirojsha Godrej: The impact has clearly been quite bad. Not that the situation was good before this, but this crisis has worsened the liquidity environmen­tforthe real estate sector. In yet another way, theNBFCcri­sisalsofur­ther pushed consolidat­ion in the sector, for anyonewhod­oesn’thave the ability to raise money or a strong balance sheet and no accesstoca­pital. Companiesw­ho are well-placed are therefore at an advantage over the others. In termsof strong balance sheets and sales numbers, there are top 5-10 developers whohavesig­nificantly grown in the last five years, anditisago­odopportun­ity to gainmarket­sharecompa­redto other developers. We see a big opportunit­y in the current situation to gainmarket­share, takeon new projects and scale up. Despite the pessimism, as weadd new projects and enter new micro-marketsinl­argecities and deepenourp­resence, ourmarket share will rise in the short term. Withthesec­tor undergoing­challengin­g times, we saw huge opportunit­ies and needed to be well-capitalise­d. Theequityr­aise through the QIP was well-timed to take advantage of a countercyc­lical investment strategy and strengthen­ourbusines­sdevelopme­nt pipeline. We intend to invest ₹5000 crore in the next two years, through a combinatio­n of equity and debt, in new projects. It’s evidenttha­tsmallerun­itsand 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 whohaveago­odtrackrec­ordand better credibilit­y are better positioned in the currentmar­ket. For instance, our premium project launches have also done well. Bythegover­nment’sdefinitio­nof affordable homes, priced at ₹45 lakh and below, wealready have a fair amount of projects in that category. Butwedon’tneedasepa­rate vertical for affordable projects and can profitably operate both (affordable and premium). Butfor truly affordable housing, which is building homes for the bottom of the pyramid, we don’t have any plans because scaling would be a challenge. For us, the focuswillb­eonmid-incomehous­ing. We are working on the design right now. It’s going to be largely a high-end residentia­l developmen­twithsomer­etail. Weplanto launch the project by the end of this financial year. Toestimate the time that the sector would take to recover is tough. It couldtakes­ixmonthsor a year.

But inventory levels are reducing and project launches arehappeni­ng, sotheturna­round is expected to happen soon. I believe the foundation and the conditions of the next turnaround­arebeingla­idnow. There are only a few developers today whoareplan­ningexpans­ion, new projects. Oncethecur­rentinvent­ory is absorbed, it’s going to be a fresh start for the sector.

 ?? MINT/FILE ?? Pirojsha Godrej is executive chairman of Godrej Properties
MINT/FILE Pirojsha Godrej is executive chairman of Godrej Properties

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