How Godrej Properties Is Preparing For Real Estate Market Post Covid-19
Godrej Properties expects short-term disruption in sales and construction activity amid the disruptions caused by the pandemic.
![Men play volleyball near the under construction Godrej Prime, a residential property project developed by Godrej Properties Ltd., in the Chembur area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)](https://media.assettype.com/bloombergquint%2F2019-05%2Fffee98fe-5c7b-4423-9eb8-a73dce22b75e%2F323116342_1_11.jpg?rect=0%2C0%2C4000%2C2250&auto=format%2Ccompress&w=200)
India’s second-biggest real estate developer by market value maintains its target of investing Rs 5,000-6,000 crore on buying land bank even as it expects short-term disruption in sales and construction activity amid the disruptions caused by the coronavirus pandemic.
“We are sitting on a massive amount of cash flow right now. So, we would like to invest it at the right opportunity at the right time,” Mohit Malhotra, managing director and chief executive officer at Godrej Properties Ltd., told BloombergQuint over the phone. “In medium to long term, some of the big players like us will emerge even stronger and the industry will go through more consolidation,” he said, adding there will be a revival in demand and focus will shift from renting a home to buying.
India’s real estate demand hasn’t recovered since November 2016 overnight cash ban and a stricter housing law protecting buyers against fraud. A slowing economy and a liquidity stress aggravated the slump, stalling projects. And now a virus-driven lockdown dealt a fresh blow.
But Malhotra’s optimism stems from the company launching 17 new projects in the financial year ended March 2020. Total booking value of Godrej properties, according to an earnings report, jumped 11.2% year-on-year to Rs 5,915 crore during the fiscal. Its total booking volume rose marginally to 8.80 million square feet. Just in January-March, the developer sold 3,000 apartments.
Here are the edited excerpts from the interview:
What will be the impact of Covid-19 on real estate business?
In short term, there will be disruption both in terms of sales and construction activity. In medium to long term, some of the big players like us will emerge even stronger and the industry will go through more consolidation. There will be a strong revival of consumer demand once the Covid issue is resolved. The affordability is at all time high, interest rates are now lowest ever.
Are you experiencing any project delay due to the slowdown in the construction activity?
We keep enough buffer between our internal timelines and what we commit in RERA (Real Estate (Regulation and Development) Act) and to the customers. We can absorb nine to 12 months kind of a delay. But short-term disruption in construction is a reality and how quickly that gets resolved is a question now. Inherently, we are not worried about the overall construction timeline of our projects.
Have you resumed construction activity across all your sites?
We have started construction at most of our sites. Some of the places like Bangalore, Gurgaon are in better stages. In Mumbai, we have been allowed to start construction in some projects. It is different across the country but by and large we have started some kind of activity in most projects.
Have you experienced any default from homebuyers with regards to payments?
We haven’t experienced that.
Are you looking at online sales?
Yes, we are doing a lot of sales online and our systems are in place to handle those kinds of things. We have been able to provide pretty good experience to people to transact online. In the last 15 days of March, we have been able to clock sales worth Rs 800 crore.
RBI governor said India’s gross domestic product is going to be in negative for at least a year. How do you see that affecting your business?
There will be a short-term disruption with Covid and we will all have to brace ourselves for that. But if I am looking at the slightly longish horizon, I am not worried. We are quite well placed as an organisation to weather the storm.
In our interaction earlier this year, you had mentioned about investing Rs. 5,000-6,000 crore in land in the next two-three years. Now given the current situation, any changes to that plan?
We are sitting on a massive amount of cash flow right now—cash in the bank. So, we would like to invest it at the right opportunity at the right time. As of now, we are also keeping a close watch on how the market is evolving but whenever the right opportunity presents, we will then look at it.
So the plan of investing Rs 5,000-6,000 crore in land remains unchanged?
Yes
How are sales in international markets?
Sales are happening quite well in the international markets. We are seeing a rise of sales in the international markets. We already have large presence in the international markets. We have offices in Dubai, Singapore and the U.S. Almost 20-25% of our sales every year happen through international markets. We remain bullish about that market.
In India, any plans of expanding to other markets?
Right now we are focusing on the existing ones. That is Mumbai Metropolitan Region, National Capital Region, Bengaluru and Pune.
How much time do you think it will take for the demand to come back to the real estate sector?
Once the economy starts to bounce back and people have job security, you can expect a strong revival.
What kind of government intervention do you think is required for the industry to bounce back?
Real estate industry is one of the largest contributors to employment and if we want to bring GDP growth back, if we want to kick-start the industry, I think real estate is a very important industry. From my perspective, if the government can bring back consumer demand by giving some sops like stamp duty waiver or some tax benefit, then everything will automatically take care of itself. If the government can do more for consumers, we will automatically start benefiting from that.
Given the current scenario, any changes in your existing joint venture/development management contracts?
We have not asked for any changes and neither have they. As of now, no such discussions are happening.
A lot of your projects involve clearing of slums. How do you see the current situation affecting the overall slum rehabilitation authority projects?
Everybody has realised the risk of epidemic happening in slums. I think the government will also push harder and support these SRA developments more. I think it will accelerate SRA developments whenever it opens up.
What kind of projects are you looking at right now for joint venture/development management models?
There is no change in our strategy. We are looking at joint venture and some of the outright deals in special scenarios. Right now, it is wait and watch and then we take a call depending on how things evolve.
What according to you are some of the key trends that will emerge in real estate sector due to the pandemic?
There will be consolidation in the industry. Customer demand will shift from rental housing to owning a house. People have now realised the importance of home in their lives in the last two-three months.