To focus on housing over TDRs, for next few quarters: HDIL

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To focus on housing over TDRs, for next few quarters: HDIL

Real estate builder and developer Housing Development and Infrastructure (HDIL) is all set to shift its focus towards the housing projects over the Transfer of Development Rights (TDRs) market for the forthcoming quarter, says vice chairman and managing director, Sarang Wadhawan.

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Real estate builder and developer Housing Development and Infrastructure (HDIL) is all set to shift its focus towards the housing projects over the Transfer of Development Rights (TDRs) market for the forthcoming quarter, says vice chairman and managing director, Sarang Wadhawan.

In an interview to CNBC-TV18, Wadhawan says that the realty firm sold its major TDRs from phase I of airport project and more TDRs will be generated post phase II of airport sale.

Talking about the TDR market, which has always remained quite weak, he says, "We expect TDR rates to be stable at Rs 2,500-2,800/sq ft." Further, he also expects the company's debt to reduce by 10-15% in this year.

Below is an edited transcript of Sarang Wadhawan's exclusive interview to CNBC-TV18. Also watch the accompanying video.

Q: Do you see a pick up in the TDR market, anytime soon or do you expect this to be the state of affairs for sometime longer?

A: I think the TDR rates are going to continue where they are. They are currently between Rs 2,500-2,800 per square feet. The weakness is not coming from any major policy change. The 0.33 was expected, the Government of Maharashtra did have to amend the Monopololies and Restrictive Trade Practice (MRTP) together, 0.33 FSI. But having said that, the TDR demands of 0.67 component still remains very strong and people who were postponing the purchase of TDR have now come into the market.

So, I still think that TDR prices are going to continue to remain buoyant. I think they will continue at these levels for sometime till that demand for 0.67 goes out. I think it's not such a bad scenario.

Q: Do you expect volumes to be sluggish because last quarter or the quarter gone by the TDR volumes were not great?

A: The TDR volume earlier was as per our project accounting methodology since we follow a project completion method. We account for the sales that have taken place in that quarter. Yes, with 0.33 FSI coming in, TDR sales did take a little bit of a problem. But at the same time our residential accounting for the year was great and continues to do so.

Over the next one year, you are going to see a lot more dependants on the residential accounting rather than TDR. Also, we have to understand the fact that we have sold off a majority of our TDR being raised from the phase one of the airport project. And, that project is now on the stage where the government needs to change the visibility norms and shift the people. Once phase two starts, at that given point we will get a lot more TDR. But this 0.67 component is a major component for all developers in Mumbai. They require this TRD to average out the cost of land and hence, it will continue to do so.

Q: Any concerns that your cash collection cycle might be getting longer because of increased FSI sales, for example like the Goregaon project which contributed quite a bit to the last quarter numbers?

A: The Goregaon project contributed approximately Rs 280 crore to the last quarter numbers but that sale was entered into last year. Since we did finish off part of our liabilities, we were able to account for part of the income derived from that project. The Goregaon project has had its success. We sold off almost all of the FSI out there. We still have balance 3,00,000-4,00,000 square feet that we will be developing on our own. But this is one of the things that continue in the HDIL cycle of cash where in we do sell FSI, we do sell TDR, we do sell residential projects. If Goregaon is now nearing completion, we will definitely, we do have other projects which will come on line for FSI transactions.

Q: Can you give us an update on the Mumbai International Airport (MIAL) project and are things still moving at a sluggish pace out there?

A: The government policy over the last few quarters has been a little slow. The government is looking at a combination of National Rehabilitation Policy as well as the State Rehabilitation Policy. Once the eligibility norms are amended by the Housing Department of Government of Maharashtra, we will have a lot more clarity on the actual number of people to be shifted out. Delays in surveys have not been very forthcoming, primarily, because the eligibility of people is post year 2000; we were targeting people prior to year 2000. Once the eligibility norms are amended, I think majority of the people will then be able to be shifted to Kurla and to our other locations. At that given point in time, the phase two will then come into focus. Right now we are just waiting for the government to take some action on it.

Q: Can you give us an update on your balance sheet because we did not see any significant signs of further debt reduction in the current quarter?

A: On a standalone basis our debt reduced by 2%. This quarter we are targeting debt reduction by almost 5%. Over the year, I am sure that we should be able to reduce debt by between 10-15%. We were cash flows positive for the last quarter by Rs 100 crore. We are still repaying debt and over the next year we will see a significant change in our debt figures.