I am pleased to present the prospects of your Company with the over-riding message that we stand at the cusp of an inflection point.
During the last few years, Mumbai''s residential realty market passed through a challenging transition. A market that addressed actual users and speculative interests has seen prices and offtake decline. Even as Mumbai by itself will see a sustained growth in the demand for homes on account of a growing local economy, we believe that the prevailing residential oversupply in the luxury space will take time to correct. Only when this oversupply has been progressively liquidated can one expect stability in prices and offtake.
At Poddar Housing, we made a decisive extension in our business strategy by extending from distant Mumbai suburbs and hinterland to the city proper during the last financial year. The Company launched its first residential project in Mumbai with a 100,000 sq ft offering in Chembur even as it continued to launch residential offerings in its longstanding Badlapur location.
Enhancing long-term shareholder value
A shareholder would be inclined to question the rationale of our management selecting to launch two projects (Badlapur and Chembur) in the last financial year.
I must assure stakeholders that the decision was taken with the objective to enhance long-term shareholder value. The two offerings have helped the Company address different customer groups, helping broad-base its risk. The Badlapur project, where we enjoy an existing presence, addresses a specific target segment of actual users. Given the fact that we have enjoy an excess of buyers over available supply - our previous offerings were largely sold - we believe that our new offering addresses a ready and existing market.
The Company''s decision to enter Mumbai needs to be explained. We believe that even as the Mumbai market in general remains weak, there will always be attractive localised opportunities. Over the last few years, Chembur has emerged as one such local opportunity. What was once dismissed as a distant Mumbai suburb is now being perceived as integral to India''s financial capital. This transformation has been the result of a 23.55 km expressway connecting Chembur to South Mumbai, which has shrunk commuting time from an hour to around fifteen minutes. The result is that a number of people are seeking homes in Chembur, making this Mumbai pocket one of the fastest growing in the last few years.
Reinventing our brand
One of the things that the company has embarked upon is the reinvention of its brand: from a company exclusively focused on the lower middle-income segment to a value-added segment as well (without vacating its longstanding presence). We believe that this transition will enhance our visibility among listed players with a growing presence in Mumbai''s real estate sector.
Two, the company is graduating from an established competence in building ground plus four-storey structures (G plus 4) to ground plus 20 structures, which warrants increased competence. Besides, this transition has warranted an increase in team size: from 127 at the close of 2016-17 to 140 at the close of 2017-18, accompanied by senior level recruitments.
Three, the Company invested in ERP with the objective to strengthen cost analysis-cum-management that makes it possible to take more informed decisions and to address business growth.
Four, we believe that the need of the hour in Mumbai is to create homes that are within a customer''s spending capacity. Conventionally, builders invested in facilities and home configurations and then priced the end product (home), resulting in expensive homes. In today''s environment, the need is to work backwards: price the home around a level where it will be affordable for the largest consumer segment and then work backwards towards apartment configuration that moderates costs on the one hand and protects our overall profitability on the other. We believe that adapting to the core needs of customer, we will create homes that sell faster, kick-starting a virtuous cycle of revenues, cash flows and profitability.
The implementation of MAHARERA and GST during the last financial year hold out attractive prospects for the sector.
For decades, the country''s residential real estate sector was largely unorganised with virtually no governance framework. The result was that promoters could launch projects without relevant municipal approvals; the purchase consideration would be allocated for other properties; property design would often be changed following sale and there would be no penal liability for delays in handover.
During the last couple of decades, the sector began to graduate towards formal and organised structures, marked by branding, process integrity, better design, timely delivery and ethical practices.
RERA implementation has transformed sectoral realities through the creation of a formal organised sector. Through timely changes in land acquisition, offering, design, sale and post-sale, the government (through RERA) strengthened compliances and enhanced sectoral credibility. The creation of a level playing field could induce the exit of small players from the business. The slowdown in apartment creation (as a result of higher regulatory compliances) could help prices stabilise faster. There is a possibility of weaker players (who own land) partnering larger players, a win-win proposition.
Robust business model
At Poddar Housing, we are attractively placed to drive growth from this point onwards. We possess a large land bank of ? acres, moderate debt, accelerating launches, attractive customer traction and regular inflows that should graduate the company from one level to another.