Due to delay in approvals we lost three years, we are now making for it. In just another three years we will be there on the doorsteps of the stock markets. So, everything is back on the table including the Lavasa IPO, Ajit Gulabchand, HCC said.
Lavasa, Hindustan Construction Company's (HCC) hill city on the outskirts of Pune will be developed across 18,000 acres. Its size is about one-fifth of Mumbai. Construction at Lavasa had been banned by the environment ministry resulting in a loss of almost Rs 730 crore for HCC.
After a year long protracted battle with the then Environment Minister Jairam Ramesh, HCC got the green signal in November 2011. In an interview to CNBC-TV18, Ajit Gulabchand of HCC spoke about the latest happnening in the company and the road ahead.
Below is the edited transcript of Ajit Gulabchand's interview with CNBC-TV18.
Q: It has been a year and a half since you got all the approvals from the environment ministry. Has that helped in sales? Have you seen an uptick?
A: The issue is that the state government whose responsibility was to give the clearance had given it. The central government, ministry of environment and forests (MoEF) felt that they need to be the people giving clearance. Now, based on that we have got clearances from two places, we are twice cleared as a project. To move on from there we have started the process again.
In the last few months, we have sold more than 300 homes there both apartments and villas. There are about 5,000 construction workers on the ground there. It is coming back to its full construction, which you will see as soon as the monsoon is over.
Q: But has that uptick in sales also being complimented by a price appreciation?
A: We began sales and sold three, four years ago at a price of about Rs 2500 a square feet. Today, these same places are going at about Rs 4000 a square feet. There were villas that were priced at Rs 1.5 crore, the same ones are now – some sales are happening at about Rs 3.5 crore. So, the property valuation there because of what is being built there is going up every year. Therefore it shows that there is a growing demand for this.
Q: What all can we expect at Lavasa in 2013? Do you have a strong launch pipeline?
A: There are three aspects to Lavasa’s economy. First aspect is there will be homes for people to live. So, there would be rental homes for those who will come to work there and will not be able to afford to buy initially ranging from Rs 500 a month to Rs 3000 a month. Then there will be villas as well going up to Rs 2 crore as well as apartments starting at Rs 10 lakh and that is underway.
The next is it has to build a healthy place for tourism, hospitality and leisure. So, hotel which were stalled are now being renegotiated and restarted so that it has a continuous tourism economy in that place. Third is soft businesses, research centres, etc which have been already included in the plan and have been approved by the Maharashtra government.
Q: Can you tell me what the profile is of the people that are buying into Lavasa? Are they those who want a holiday home? It is also a hill city so are we seeing senior citizens and retired folks looking to settle down here perhaps NRIs looking to make an investment?
A: It is across this whole section you spoke about. When you begin a Greenfield project in a brand new place it would be second homes to begin with. There is a company called Ashiana which builds retirement homes. They have taken a large area there and are building a full retirement home. They are now negotiating one more plot to expand that activity in other towns of Lavasa as well. So, you will have older people who will settle down there, you will have a large youthful population.
Afterall it is being deviced substantially for young India. Today average age of India is 26 years 7 months, so this aspirational population that would like to stay there. Most of the apartment homes, etc are going to younger people between the age groups of 30-45. As far as the rentals are concerned, it would be for those who come and work there. So, there is a whole segment of apartments that cost Rs 10 lakh to Rs 20-25 lakh and to even Rs 35 lakh. It goes all the way to Rs 2 crore plus. So, it is across socio-economic cross section.
Q: This is a mammoth project, can you tell me how much of Lavasa has already been completed and how much of it is already been sold?
A: The first town called Dasve in the whole city of Lavasa is already sold. We are delivering villas and some apartments that are coming up there, it is growing everyday. It should be completed by almost this year end or by next March or May.
The next town Mugaon has already begun construction and sales which I mentioned now are for that area. In all there will be four such big towns and one low cost housing town. So, it will consist of five towns across the entire development.
Q: You are not going to like this comparison but very often parallels have been drawn between Lavasa and Aamby Valley. Now, Aamby Valley has never really taken off so on what basis should we assume that Lavasa will be a success?
A: You must appreciate one thing that these are very different types of developments and they are a model of their own kind. Aamby Valley is substantially high-end resort town whereas this is a full-fledged city where there is an economy where you not only have homes you will have jobs because of hospitality, tourism and leisure.
There will be something like 20-30 hotels. Even now there are three hotels operating and about nine of them are under construction. So, you will have businesses to settle down here. Second is there already four schools operating and there will be many more schools and universities operating here. There is a full Apollo Hospital, 60 bed hospital operating.
They will be setting up a medicity on 200 acres. Also, there is a big convention centre. There are only two world class convention centres or world rated convention centres in India, one is in Hyderabad and the other is at Lavasa. So, this creates a kind of seven days economy in Lavasa.
In totality, we are actually building a city across the socio-economic spectrum. Therefore we feel it is going to be a far different development and much more acceptable. India will have a huge migration of almost 400 million people in the next 40 years and this is something that means we will need a lot more new cities.
Professor Prahalad had said 500 new cities, new neighborhoods to existing cities and reshaping the existing cities as they are. So, when you look at that kind of demand that India will have on cities I don’t see why Lavasa situated in the richest belt of India between Pune and Mumbai will not be successful.
Q: Resale’s are very often seen as a barometer of how successful a project has been. How have resale’s been at Lavasa?
A: There is not somebody who wants to sell it and hasn’t found a buyer for it and who has not sold it at a good profit.
Q: How did your customers react to construction being stopped for a year? Obviously delivery of their homes have been delayed for example, have they demanded compensation?
A: I am really grateful that all our customers have been exemplary in their behaviour. They completely understood what had happened. They also realised that all that happened was not necessarily right it was wrong what they did to Lavasa so much so that the villagers had also joined in the petition against the government at that time.
Therefore in this context we have had extraordinary support from our customers who have understood and are now accepting their delayed deliveries with considerable grace. Ofcourse there will be some irate people, but that would have been there even if all this hadn’t happened. However, by and large I found that there has been an extraordinary support.
The minor suffering that has actually happened is that those who were setting up the theme parks, who had invested a lot of money in equipment, etc they have suffered big losses and are now having some problems getting back on their feet.
However, other than that we have had some excellent support and we hope to capitalise on that as soon as the monsoon season is over to build rapidly and handover to these people their villas and their apartments very quickly and go on to build the new ones which will be sold during the year.
Q: Is the Lavasa initial public offering (IPO) back on the table?
A: Everything is back on the table but you must understand we have lost three years, so we have to now make up for it. Just add three years to that and we will be there on the doorsteps of the stock markets soon.