It gives me great pleasure to address you while highlighting your Company’s performance during Financial Year (FY) 2017-18. The strategy of your company has been to enhance revenues while executing projects on time and in reducing the debt of the Company. To that end, during the year 2017-18, we successfully closed sale of 3 land parcels one each in Mumbai, Pune and Bengaluru. Your Company has also made good progress towards monetisation of some other noncore assets during 2017-18, the results of which you should see in the next year. During the year 2017-18, the Company sold 4,05,293 sq. ft. across its projects compared to 5,73,299 sq. ft. During 2016-17, the reduction being primarily due to impact of GST. The revenue for 2017-18 stood at Rs.673 crore compared to Rs.454 crore in 2016-17, registering a growth of 48.24%.
India’s real estate sector saw two major reforms in the fiscal - the Real Estate (Regulation & Development) Act (RERA) and the Goods and Services Tax Act (GST). Rollout of reforms like that of GST and RERA will spur the growth of the real estate sector in the long run. Immediately after the introduction of
GST, there has been a lot of resistance in sales of high-value ticket sizes, since an effective post-GST levy of 12% has led to considerable escalation in ticket size for the buyer. The savings assessed in any on-going project, due to introduction of GST, have only been partial since substantial construction progress has taken place in most of our projects. Moreover, the percentage of land cost, as a proportion of the total project cost, in most of the projects located in Mumbai, is very high and is exempt from GST. Hence, the benefits accruing due to the introduction of GST that could be passed on to existing customers have been limited. With GST in place, however, customers should see real benefit in the near future from reduced construction costs, in new projects.
Within the residential asset class, Peninsula Land Ltd. has been catering to the demand in the premium and ultra-luxury segment, in which, the demand has been muted because of the considerable increase in absolute value of taxes, post introduction of GST. Although the Company has been doing reasonably well in this segment, the overall macro-economic situation has limited the growth in this segment. In the context of the present Government’s vision of “Housing for All” by 2022 and several initiatives and policies planned around the vision, your Company has now embarked on addressing the needs in the affordable housing segment through our development at Gahunje, in Pune. We have entered the affordable housing segment by launching the “addressOne” project which is aimed at providing affordable luxury to consumers.
Exploring new opportunities
The Company is also closely evaluating the opportunities in the mid-income housing segment and also scouting for opportunities in commercial asset class to add to the portfolio. We are also carefully monitoring the changing trends in real estate like commercial REITS, to prepare for the future.
With the focus on future growth, the business strategy is built on the following pillars:
a) Efficient capital structure
The Company is working towards managing an optimal capital structure with alignment of cash inflows from sale of Inventory with cash outflows towards construction cost, debt servicing etc.
b) Commercial portfolio
The Company is looking to grow our commercial portfolio.
The Company is also looking forward to acquire new projects in Mumbai, Pune and Bengaluru under Asset light models. However, the focus will be to acquire projects in which the time to market from the point of acquisition is minimal.
At the end of the day, Peninsula Land’s strongest asset is our people. They enable us to deliver on our purpose. It is an honour and a privilege to lead a team of such passionate and creative thinkers. We are united by a commitment to our purpose, to our customers and to our community.
The key challenges are stagnation in market prices and the inability to match current inventory costs vis-a-vis pricing of inventory in new projects launched after introduction of GST. Further, customers have been fence-sitters for a long time with the consideration that market prices have not yet bottomed out. However, the right product along with the right pricing is seeing traction in the market.
Going forward, your Company plans to go about executing on-going projects within envisaged time frame, reduce debt by monetising non-core land parcels and by adopting asset-light models in the acquisition of any new projects. We expect to achieve sales volumes and sales price realisation in each of our projects amidst the tough environment in the real estate space. Towards this objective, the Company is revamping the entire sales and marketing Organisational structure and approach, to make it more effective. Simultaneously, the Company is also working to create a unique value preposition to position ourselves in the market in addition to scouting opportunities across different asset classes and geographies to diversify risks and grow further.
In closing, I would like to thank all of our customers, consumers and shareholders for your continued support.
Rajeev A. Piramal
Executive Vice-Chairman & Managing Director