Won't offer discounts; realty isn't saturated yet: S Raheja

Ritika Dange
moneycontrol.com

At a time when most market analysts and potential home buyers are expecting realty prices to fall, Ram Raheja, director and head-architecture & design, S Raheja Realty, says the company will not be offering any discount this festive season.

Raheja's view comes on the back of an alarming slump seen in the realty market with most cities’ inventory levels rising far above the normal levels. Also read: Realtors hope to clear inventory on freebies, festive sales
"As a company, we believe in offering the best possible price to our buyers. Hence, we do not look at giving any special discounts on particular occasions as our objective is to provide good quality housing at affordable prices," adds Raheja who has launched the second phase of affordable housing in Palghar.

This second phase of Palghar housing is priced approximately 60 percent higher than the first phase. However, there is no question of any discount owing to RBI’s repo rate hike or a festive season, says Raheja.

The company is confident of logging in 40-50 percent profits in FY14, says Raheja who doesn’t find anything lacking in the government’s efforts to boost the sector. However, simpler and faster approvals could help move the market faster, he adds. 
Raheja also dismisses views that India's realty space is saturating. His rationale is that India’s large growing population will always induce demand for good projects, he concludes.

Below is the edited transcript of Raheja’s interview to moneycontrol.com. Q. What is your view on the RBI banning the 80:20 scheme?

A:  As per the 80:20 scheme, the buyer pays 20 percent of the purchase price upfront initially and the balance on possession, irrespective of when that happens. Prices of real estate in India is growing at a phenomenal pace and due to this sky-high property prices, genuine buyers are forced to stay away from the transactions leading to a 50 percent decrease.
Therefore, from a builder’s point of view, it was lucrative as it attracted the buyers and also gave the developers a security in terms of sale . However, S Raheja Realty never used the scheme for any of their projects.

Q. Given the slump in demand, higher credit costs, structural obstacles and delay in clearances, do you believe realty has reached a saturation point in India?

A: Owing to the large population in India, there can never be saturation in the demand for housing or real estate. Therefore, no matter how complicated the laws or processes, there is a lot of demand in the market for good projects.
Also, the demand cannot be generalized, as India has differences in terms of demand and supply. Some parts of the country may be affected by the market forces more than the others and even within the same city like Mumbai, some areas may be very sensitive to the price rise while some may remain unaffected. Thus, though the realty market has seen a dip in demand in the last few years, it will be incorrect to say that it has reached a saturation.

Q:  What can be done by the government to give a boost to the realty industry?

A: As a company, S Raheja has no complaints regarding government’s role. The new DCR has a lot of clarity and it’s a very positive one with the developers interests in mind. However, the processes especially in terms of approvals can be a little faster and less complicated. This can ensure the whole market moving faster and more efficiently. Q. What is your growth estimate for Q2 and FY14 in terms of sales (revenue and area-wise) and profitability?

A: We are looking a fairly good growth in FY14, with a  40%-50% profitability approximately.

Q. Are you planning to launch any new projects in FY14?
A: S Raheja has several projects lined up for FY14, the details can be disclosed only once all the approvals are in order.

Q. How the apartments/flats are stacked in luxury and affordable housing segment in terms or area and pricing? How has the demand been for the same?

A: All the luxury and affordable projects are priced as per the BMC approval, which refers to the per sq ft area price of that particular area. There is always a demand for luxury apartments though the demand is in pockets or concentrated around specific areas in the city.
As pioneers in this category, S Raheja always focuses on building the most luxurious apartments, irrespective of the area. For example, in Varanasi, SDS Raheja Residency has been designed with all the amenities of a luxury apartment, unmatched by any other projects in the area.

As far as affordable housing is concerned, the demand is very high in the affordable sector. Since the price of such apartments are lower, the buyer-base is broader. Owing to the large population, the demand for affordable housing is always more as it includes those who can also afford luxury apartments and often buy a second or third property as an investment.

Q. What stage of construction is the S2 Mahim project under? Has there been a delay? If  yes, why? When do you expect to complete it?

A: The project is almost complete with only the interior work going on right now. Since the S2 will also house a healthcare facility, there are a lot of technical specifications which need to be followed and that is being undertaken.

There have been no delays and the construction is going as per the schedule .The project is expected to be completed by mid 2014.

Q: If banks transmit the repo rate hike by increasing the loan rates, by how much do you see your sales getting affected?

A: The sales will definitely get affected but as a company we operate with very limited stocks, so the impact will be only marginal.

Q. Will you be reducing prices or give any discounts on the apartment rates post the RBI hiking the repo rate by 25 basis points? If yes, then by how much?

A: As a policy, S Raheja gives luxurious and sustainable projects at reasonable rates and does not give any discounts. The customers have faith in the pricing.

Q. Will you be offering any discount to customers in this festive season? What kind of sales are you expecting from September to December compared to previous year?

A: As a company, we believe in offering the best possible price to our buyers. Hence, we do not look at giving any special discounts on particular occasions as our objective is to provide good quality housing at affordable prices.

Q. You have launched the second phase of your affordable housing in Palghar. Was the first phase a 100 percent success?

A: Yes, it was a 100 percent success which prompted us to launch the second phase which is much bigger, spreading over 7 acres with 400 units. Q. You have hiked the rates of second phase apartments by nearly 60%. Do you see people buying at these high prices?

A: The price hike is an indicator of the rise in land and construction costs in the area. There is a growing demand for housing in Palghar especially with the railway line being extended from Virar to Dhanu. As a result, the pricing is in sync with the market and  there is no question of that in any way affecting that demand.