Demand for residential in India is strong: Prozone

In an interview to CNBC-TV18, Nikhil Chaturvedi, managing director of Prozone says residential demand, at the right price levels, will sustain. "There is a huge surge of demand in middle class Indians. If the interest rates start tapering down then you will see much more positive moments. So, residential is strong, but in the right price bracket," he asserts. 

He further says the company has only one operational project. "Last year, we declared a top-line of Rs 50 crore. The bottom-line was negative as we had almost Rs 27 crore of depreciation. It was the first year of operation of the centre. I think these six months have shown improvement. We will be turning positive from these six months," he adds.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra.

Q: Can you take us through how the first six months have been for the company?

A: We have only one operational project. That is in Aurangabad. Last year, we declared a top-line of Rs 50 crore. The bottom-line was negative as we had almost Rs 27 crore of depreciation. It was the first year of operation of the centre. I think these six months have shown improvement. We will be turning positive from these six months.

Q: Could you take us through your revenue mix at this point in time for residential as well as commercial?

A: We have a total portfolio of 17.8 million sq. ft. Out of that, almost over 80% is in residential. The remaining 15-20% is in commercial and retail.

Q: What sort of margins would you be clocking at this point?

A: Actually, we don’t see it as margins because all our commercial play is long-term. We do not sell the commercial at all. So, basically, we build large regional shopping centre. Our basic model is that once we build a shopping centre, the surrounding land is extremely invaluable. We build residential there. That helps us actually create debt free assets.

At the current moment, we have skewed the model. As the demand for residential in India is extremely strong, we are launching the residential and the mall simultaneously. So, by the time the malls are up and built, you will find that the residential cash flows will be very strong and the first phases of the residential will already have been launched.

Q: Recent data suggesting a huge divergence between commercial and residential sectors. There is considerable difference in off take as well as rates. Can you give us some idea as to how your different segments are doing?

A: I think residential demand, at the right price levels, will sustain. There is a huge surge of demand in middle class Indians. If the interest rates start tapering down then you will see much more positive moments. So, residential is strong, but in the right price bracket. So, when you sell homes between Rs 30 lakhs to 50 lakhs, that is where the highest fraction is.

Q: What the future projects would be in the next couple of quarters? Could you just outline any sort of projects which are under development and which could be coming up?

A: We have six projects altogether. Out of the six projects, five of them are under work currently. In the next two quarters, we have residential projects in Coimbatore, Nagpur and Indore. The shopping centre in Aurangabad is already functional. We had an office space of about 200,000 sq ft, which is going to be completed over the next two quarters. So, the cash flow from that should also come in.

In addition to that, we are also building the next phase of office complexes there. There are two malls, which are going to be under construction, one in Coimbatore and one in Nagpur. But that will reach completion only in 2015.

Q: After the recent demerger and listing, would you require any capital?

A: At the moment, we are fully funded. All our projects have financial closure. All our land banks are fully paid up. We have additional cash in the company. As and when we find opportunity, we might look at raising capital. But at the current moment, we do not feel the need for that. There is enough land bank for us, which we can exploit and create enough values for us and our shareholders.

Q: What is the industry expecting in terms of FDI?

A: I think expectations from FDI for each and every person in this country is similar. I believe that it will bring in the right amount of capital and the right amount of expertise. It will benefit both mall developers and retailers. So, I think it should be extremely beneficial.