Prestige Estates confident will achieve FY12 guidance

The Reserve Bank of India (RBI) raised the key interest rate for the 12th time since March, 2010, by 25 basis points to rein in high inflation. With RBI's decision, the home loans are set to get costlier, which would impact the real estate space.

In an interview to CNBC-TV18, Prestige Estates Projects' chief financial officer Venkat Narayana spoke about the implications of the interest rate hike, and how the demand pans out for the current fiscal and going forward. Here is the edited transcript of his interview. Also watch the accompanying video. Q: How is demand on the ground? What do you expect by way of sales and launches in FY12? How will the growth be?
A: The demand on ground has been good. The rise in interest rates has impacted and hurt the real estate companies. A consumer, who was looking at buying a Rs 50-lakh home, now has to settle down for Rs-40 lakh home. Despite that, we are able to clock in good volumes.
The response for our launches in earlier quarters and last month has been very good. Now, the interest rates are at the peak and once they start coming down, the demand can get even better.
In the last five months up to August 31 of this fiscal, we have sold as many as 1,500 units admeasuring to 2.2 million square feet of area with a value of around Rs 820 crore. Q: How is realisation panning out? For a flat in the same area, are the per square foot rates falling a little bit due to this double scare that IT hiring and compensation will not be as good as one expected it to be, given the US slowdown scare as well the rate hikes?
A: The impact will not be very instant. The prices in Bangalore market are holding up. The average realisations with respect to mid-income housing are in the range of Rs 3,500-4,500 per square foot. We are working very hard to keep the prices affordable by reducing the size of units.
There is not much room to cut the prices as we also have to focus on healthy bottomlines. We are keeping the size of the units smaller, thereby the ticket size is coming down and the prices are becoming affordable to most of the people. Q: Would you stick to your guidance of about Rs 1,700 crore by way of sales and 15 million square feet of project launches in FY12?
A: So far, we have already launched 4.5 million square feet. We are on course to launch another 8-9 million square feet this fiscal. We had given a guidance of Rs 1,600-1,800 crore sales for this fiscal. So far, as of August 31, we have already achieved Rs 820 crore worth sales. Q: What's your debt position? Some of it was securitised with your rent receivables. What's the net debt position? How is it as a percentage of equity?
A: Our net debt is around Rs 1,250 crore. Close to half of this debt is way of rental discounting and the remaining is a project debt. We are very comfortable with our debt levels.
Our gross debt levels will remain at the same levels even in this fiscal because a lot of debts will get repaid. We are borrowing for the capex projects because we have strong focus on the rental portfolio. In this fiscal, we have already paid Rs 350 crore of debt. Q: Brokerages have some rosy expectations from you. One of them expects a 35% rise in your earnings growth in your earnings in FY12 and 55% rise in FY13. Is it possible for the company?
A: The realisation and reporting has more to do with the accounting and method of accounting policy. But on ground, the business has been better than what we have spelt out. The sales and cash flows are good and positive. The new projects have had very good response and the margins have gone up. Q: Will you do better than this forecast?
A: In terms of sales and collections, we will probably do better than our guidance. The business on ground has been very good. When it comes to accounting, it