‘Godrej Properties on the way to become national player in real estate sector’
Godrej Properties is rapidly becoming a pan-India player as it forays into newer markets such as Hyderabad, even as it deepens its presence in all the key realty markets in the country.
The company already has a presence in over ten major cities across India, and a significant share in the four major markets of Mumbai, the National Capital Region, Bangalore and Pune, accounting for over half of homes sold in the country.
Godrej Properties Executive Chairman Pirojsha Godrej told businessline in an interview that he was extremely sanguine about demand sustaining in the residential market, at least for the next 5-6 years, as he feels the sector is still in the early stages of an upcycle. In anticipation, the company is also acquiring land parcels to meet the demand.
Here are edited excerpts from the interview.
You are planning to foray into Hyderabad. Do you have ambitions to be a national player?
Yes, I think we do. We are already an all-India player. If you look at the top four markets we focus on — Mumbai, NCR, Bangalore, Pune – these cumulatively are responsible for more than 50 per cent of the value of real estate sold in the country. By addressing these four markets, one could argue that we are already a national player. We already have a presence in places like Ahmedabad, Kolkata, and we are adding Hyderabad too. From a plotted development perspective, we are in many cities and will expand further . As markets mature, we will have more of a presence, but a lot of opportunities for the next few years, will remain in the top 4-5 cities.
Data shows that the pace of launches across the country is slowing down. Is that your own experience?
I don’t think there is any slowdown. Frankly, some data on what got registered in one quarter or what got launched are not reliable. If you look at our and other listed companies’ sales data, which are accurate, the industry is growing very rapidly. Certainly, the larger players within the industry are growing very rapidly. Our own sales for the first three quarters of the financial year are up more than 70 per cent on year .. so, I think market conditions continue to remain quite strong.
With the rise in mortgage rates and home prices, there are apprehensions of a slowdown in demand, especially at the lower end of the segment.
Frankly, I don’t expect any correction. While the interest rates have risen considerably over the last two years, I think mortgages at 8.5 – 9 per cent are not very high for the country. The reason why mortgage and interest rates are relevant for residential demand is because of the impact they have on affordability. In the last ten years, I would say that property prices were flat for eight of those years, and in the last two years, they have started going up. Some markets like NCR have gone up quite a bit, 30 per cent or so, and other markets like 10-15 per cent. In that same 10 years, people have been getting increments, and their incomes doubled over that period. So, a 20 per cent property appreciation versus a 100 per cent income appreciation .. and even if mortgage rates go up another 100 basis points, they will still be lower than in 2011-2012. So, I think affordability for residential real estate looks very attractive. We are bullish that conditions will actually improve from a demand perspective.
You acquired Raj Kapoor’s bungalow last month. When do you expect to launch your project there, and will it be on the same lines as the one in RK Studios?
The project at RK Studios was a bit of mixed-use, mainly residential, but it also had some retail attached. On this one (Raj Kapoor’s house) it will be probably a purely residential project. They are distinct projects. We are in the process of designing. We hope the approval process will not be too long as it is quite a small project. We expect to launch the project in FY24.
You have been buying land parcels nationwide, especially over the last 1-2 years. That is quite a lot of capex.
It indicates where we are in the housing cycle and what we think will create long-term value for the company. We are in the sector’s second or third year of a cyclical upturn. Therefore we have 5-6 very positive years, ahead of us, and securing a land portfolio for development for that time frame will generate a lot of value. A lot of developers got into difficulties when they acquired a lot of land by using debt. We intentionally raised the equity, significantly strengthened the balance sheet and allowed us to make the investment. In 2020 and 2021, we raised almost ₹6,000 crore. That has given us a solid balance sheet to go out and acquire these lands. The timing is also very favourable. As I mentioned, the housing cycle is entering a very favourable stage, as good deals will be had. Some smaller developers and other sector participants are still facing liquidity challenges that make them want to partner with developers like us.