Will continue to sustain current margins: Unitech

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Will continue to sustain current margins: Unitech

The real estate space is in a bit of trouble for the last couple of days because there has been some selling. This selling comes after a huge outperformance over the last one month or so. Sanjay Chandra of Unitech, one of the largest listed players in this space explains his company's business fundamentals.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Real estate is really booming HSBC MF launches tax saver equity fund Unitech BSE | NSE 28/05/12 Are Mutual Funds betting on Unitech?

The real estate space is in a bit of trouble for the last couple of days because there has been some selling. This selling comes after a huge outperformance over the last one month or so. Sanjay Chandra of Unitech , one of the largest listed players in this space explains his company's business fundamentals.

Sanjay Chandra explains that the company has been concentrating on building and expanding its execution team over the last couple of years. He states that the company continues to expect the current run rate for the next two years.

He informs that the commpany's current revenues only include National Capital Region properties and the revenues, going forward, will include new regions.

Chandra believes that land prices in tier-I cities could go up by 15-20%. He also informs that Kolkata forms 26%, NCR forms 23% while Chennai forms 23% of its land bank. Moreover, he mentions that they have no plans of raising capital as of now. He also states that they will continue to sustain current margins.

Excerpts of CNBC-TV18's exclusive interview with Sanjay Chandra:

Q: Your quarterly numbers came as a bit of a positive surprise for the market. Looking at how you will execute projects over the next few quarters, what kind of a run rate can one expect from you because the numbers were well ahead of expectations?

A: We, as a company, have been concentrating on building and expanding our execution team over the last couple of years. We have the correct team now to be able to manage the growth, which we have shown in our numbers already. We continue to expect this kind of a run rate for the next couple of years.

Q: So will the current quarter's numbers be an indication of what kind of revenue you could clock on a quarterly basis or could it be more or less significant, given the execution plan you have?

A: Currently, the revenues on the numbers, which you are seeing, are basically from our National Capital Region projects. So our newer markets, for instance, Kolkata, where we are the largest developers does not figure into our revenues or profits yet.

So our accounting methods are such that we start accounting for revenues after we reach 20% completion in our project. So a lot of the new markets typically takes a year from the time we start generating cash flows to come into revenues for us.

Q: Some brokerages have valued your land bank at about 450 million sq foot, which works out to about Rs 36,000-37,000 crore. Would you say that it is a fair assumption?

A: We have a little over currently 500 million sq ft of buildable area though value wise, we do not give a number out on that. But in terms of square footage under building, we currently have over 500 million sq ft in our pipeline.

Q: For the tier I cities, going ahead, what do you expect to see as an average acquisition cost for land?

A: The average buildable FSI (Floor Space Index) cost in most of the tier I markets are upwards of Rs 1000 per sq ft and that would continue to go up for sometime. But we expect at least 15-20% growth annually on the land prices in the tier I cities.

Q: Without going into any values, could you break that 500 million sq ft of buildable property in percentage terms between your top three markets of the NCR region, Kolkata and Chennai?

A: In size, Kolkata would be about 26%, followed by NCR with about 23-24% and similar numbers in Chennai and the balance would be anywhere from 15% to as low as 4-5% in a place like Bangalore. So, we are in multiple cities.

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