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