Realty prices ‘will not go up for at least two years’
The Hindu Business Line, March 14, 2009, Page 3
Lodha Group eyes 30% revenues from affordable home segment.
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It is important to get the value equation right. The customer is not willing to buy unless he sees value in a product. The pricing has to be spot on for buyers to walk in. — Mr Abhisheck Lodha, Director, Lodha Group
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S. Shanker
Mumbai, March 13 With a 6,000-acre land bank in Mumbai and over 27 million sq.ft across 30 ongoing projects, the Lodha Group is clearly one of the largest developers in the country.
Valued at over Rs 32,000 crore, it has 300 million sq.ft under planning, slotted for delivery over the next five years. Beyond Mumbai, it has launched a super-luxury format complex at Hyderabad, where 60 of the 500 apartments costing Rs 2.5 crore to Rs 3.5 crore have been sold. Pune is next on its radar.
Speaking to Business Line, Mr Abhisheck Lodha, Director, shares his thoughts on the slowdown and its likely fallout on real estate prices.
Prices across metros have dropped 20-25 per cent during the last 8-10 months. Do you see a further correction given the subdued mood all around?
The backdrop leading to the current flux should be explained. From 2003 to early 2008, the momentum was driven not by value-additions but more due to easy availability of money.
The global scenario has since changed and the Indian economy, despite high domestic consumption, is really not insulated from it in toto. Overleveraged builders and developers are bound to offload their holdings and this would impact the market. Tier-II cities will be at the receiving end more so in areas of large over-supply.
There is talk that prices could go up in six months as there are few launches happening. Do you agree with this view?
Honestly, I do not see prices going up at least for the next two years.
Moreover, with elections and a new Government expected at the helm, we are in a situation where no policy issue can be addressed even in case of a dire need over the next three months.
DLF has officially cut prices in Chennai and Bangalore. Will others like you follow suit?
We have to learn from this story. Overall it creates a negative impression with the existing buyers. It is important to get the value equation right. The customer is not willing to buy unless he sees value in a product. The pricing has to be spot on for buyers to walk in. We have managed to sell 1,000 units of our CASA brand of affordable- luxury homes in Thane near Mumbai between December 15 and February 2.
How will you (developers) assure people that the down payment made for a project of his/her choice (for the near future) is not diverted to ongoing ones?
This is where the reputation of the developer matters. We have not faced such issues and in any case once a Lodha project rolls out, besides our equity, the project funding is sewn up. The borrowed fund level dips as internal accruals flow in. One probable way to address the issue would be for developers to create an escrow account.
Have you cut back on projects or shelved any?
We are on track but it would be wrong to say we are not impacted. As regards Mumbai, we have shelved a commercial project in Andheri. However, we are launching a middle-income group housing project at Dahisar this week and a 60-lakh-sq.ft township at Dombivli in April. All will be completed as per schedule.
The Lodhas are known for premium housing. How well are you equipped to make the transition to the affordable segment?
It is seamless. Only the scale of operation varies as specifications such as design change. But apart from this the quality parameters remain the same. The company looks to generate 30 per cent of its revenues from the affordable segment.
How much will you focus on the affordable segment, given that its margins are far lower than the luxury formats?
The high-end homes bring in higher margins. But what is the purpose if you there is not much demand? The affordable segment too is profitable and 20-25 per cent margins can be realised in a two-year span.
Funding is an issue for all developers. How are you placed?
We have over Rs 2,000 crore bank funding in the 12-14 per cent interest bracket, apart from PE funding of about Rs 1,500 crore.
Last year, there was talk of the Lodha Group going in for an IPO.
Not in the present market conditions.
The Hindu Business Line, March 14, 2009, Page 3
Lodha Group eyes 30% revenues from affordable home segment.
--------------------------------------------------------------------------------
It is important to get the value equation right. The customer is not willing to buy unless he sees value in a product. The pricing has to be spot on for buyers to walk in. — Mr Abhisheck Lodha, Director, Lodha Group
--------------------------------------------------------------------------------
S. Shanker
Mumbai, March 13 With a 6,000-acre land bank in Mumbai and over 27 million sq.ft across 30 ongoing projects, the Lodha Group is clearly one of the largest developers in the country.
Valued at over Rs 32,000 crore, it has 300 million sq.ft under planning, slotted for delivery over the next five years. Beyond Mumbai, it has launched a super-luxury format complex at Hyderabad, where 60 of the 500 apartments costing Rs 2.5 crore to Rs 3.5 crore have been sold. Pune is next on its radar.
Speaking to Business Line, Mr Abhisheck Lodha, Director, shares his thoughts on the slowdown and its likely fallout on real estate prices.
Prices across metros have dropped 20-25 per cent during the last 8-10 months. Do you see a further correction given the subdued mood all around?
The backdrop leading to the current flux should be explained. From 2003 to early 2008, the momentum was driven not by value-additions but more due to easy availability of money.
The global scenario has since changed and the Indian economy, despite high domestic consumption, is really not insulated from it in toto. Overleveraged builders and developers are bound to offload their holdings and this would impact the market. Tier-II cities will be at the receiving end more so in areas of large over-supply.
There is talk that prices could go up in six months as there are few launches happening. Do you agree with this view?
Honestly, I do not see prices going up at least for the next two years.
Moreover, with elections and a new Government expected at the helm, we are in a situation where no policy issue can be addressed even in case of a dire need over the next three months.
DLF has officially cut prices in Chennai and Bangalore. Will others like you follow suit?
We have to learn from this story. Overall it creates a negative impression with the existing buyers. It is important to get the value equation right. The customer is not willing to buy unless he sees value in a product. The pricing has to be spot on for buyers to walk in. We have managed to sell 1,000 units of our CASA brand of affordable- luxury homes in Thane near Mumbai between December 15 and February 2.
How will you (developers) assure people that the down payment made for a project of his/her choice (for the near future) is not diverted to ongoing ones?
This is where the reputation of the developer matters. We have not faced such issues and in any case once a Lodha project rolls out, besides our equity, the project funding is sewn up. The borrowed fund level dips as internal accruals flow in. One probable way to address the issue would be for developers to create an escrow account.
Have you cut back on projects or shelved any?
We are on track but it would be wrong to say we are not impacted. As regards Mumbai, we have shelved a commercial project in Andheri. However, we are launching a middle-income group housing project at Dahisar this week and a 60-lakh-sq.ft township at Dombivli in April. All will be completed as per schedule.
The Lodhas are known for premium housing. How well are you equipped to make the transition to the affordable segment?
It is seamless. Only the scale of operation varies as specifications such as design change. But apart from this the quality parameters remain the same. The company looks to generate 30 per cent of its revenues from the affordable segment.
How much will you focus on the affordable segment, given that its margins are far lower than the luxury formats?
The high-end homes bring in higher margins. But what is the purpose if you there is not much demand? The affordable segment too is profitable and 20-25 per cent margins can be realised in a two-year span.
Funding is an issue for all developers. How are you placed?
We have over Rs 2,000 crore bank funding in the 12-14 per cent interest bracket, apart from PE funding of about Rs 1,500 crore.
Last year, there was talk of the Lodha Group going in for an IPO.
Not in the present market conditions.
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