Bangalore-based realty firm Prestige Estates Projects Ltd is looking upbeat with strong home sales and office space leasing surpassing its own forecast for fiscal 2012. It also has a robust pipeline of launches. This comes as developers elsewhere in India are battling slow sales and not launching too many projects amid lukewarm funding sentiment for the sector.
In the last five years, the company that became public in 2010, has completed more than 20 million sq. ft of development, and has a pipeline of 36 million sq. ft, primarily focused on Bangalore, with a presence in Chennai and Mangalore.
Prestige chairman and managing director Irfan Razack spoke in an interview about the company’s project mix, balancing affordable and luxury housing, and what differentiates Bangalore from other markets in India. Edited excerpts:
Analysts are positive about Bangalore’s property market compared with the rest of India in terms of sales. What do you think sets it apart?
Pricing has played a pivotal role in setting Bangalore apart. In a market like Mumbai, property prices rise as soon as there are sales and then they breach the affordability line. There is no speculative pricing in Bangalore, and prices are realistic. So, if your pricing is right and ticket sizes are small, and the rate per sq. ft is much more affordable, it’s a great investment option too for property buyers. Also, the quality of construction in projects here, and the open space and amenities provided are superior.
Prices will keep going up, but slightly and that is mainly because input costs have gone up. But the prices are real in Bangalore and other property markets in southern Indian such as Chennai because developers are not looking for super profits.
Prestige is known for developing luxury projects, but in the last year or two you have launched several projects in the affordable category. What is the strategy behind your project mix?
We are still doing a few luxury projects such as White Meadows and Golfshire in Bangalore, and even Kingfisher Tower, which are special developments for a niche audience. Such projects move a little slower, but the city also needs these kinds of development. We have four-five luxury projects and until we bring these to a critical mass, we are not going to do luxury housing in a hurry. The product mix of a developer has to be a blend of both luxury and affordable. Affordable housing helps you reach a larger target audience and volumes come in from this segment. Today, we sell homes from Rs.25 lakh to Rs.25 crore, and that gives us a huge range and gives us a differential edge.
It’s been a good quarter for sales for Prestige, while most other developers have struggled.
Yes, we did more than Rs.1,000 crore of residential and commercial office space sales in the June quarter and have achieved 40% of the sales target that we had set for 2012-13. And that’s also because we have a cross-section of development in every price band. Our focus has been to launch projects with right pricing, appropriate ticket size, in good locations.
What about your lease rental portfolio in office space and malls?
The lease rental portfolio generates about Rs.225 crore per annum and we want to increase it to Rs.500 crore by 2015.
What should developers across India keep in mind, in terms of project mix, cash flows and in handling debt?
I believe residential projects should give only positive cash flows and the focus should be to quickly launch and sell them, where the turnaround time is very important. In developing hospitality, retail and office projects (because they are long-gestation projects) the debt tends to go up. But across segments, location and pricing are the two crucial factors to keep in mind.
Prestige still has substantial debt (Rs.1,100 crore) on its books. Is this a concern?
Debt is not a concern for us. If I dilute one development (Cessna Business Park in Bangalore) and cash out, I can reduce my debt. But that’s not what we want to do. As long as our cash flows are strong, we are OK.
Source: www.livemint.com
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