Interest rate hike to boost realty sector: Anant Raj Inds

If the interest rates keep going up, it would be a good boost to realty sector, said Amit Sarin, director and chief executive officer of Anant Raj Industries.

Sarin also mentioned that the company may pass on the benefit of low land to customers as they managed to buy land at competitive rates. "Volumes would be modest, but they would not be very high either," he said in an interview to CNBC-TV18. Here is the edited transcript of his interview. Also watch the accompanying video. Q: There has been a lot of concern about the real estate sector, land prices, lower off take in metros what is the outlook looking like? Are you anticipating modest growth or maybe flat volumes going forward or can things start picking up once the monetary policy stabilizes and interest rate don't get hiked by the RBI anymore? A: This is in two parts now. Reducing land prices going down is an opportunity for people like us. In the last one and a half year we have used this opportunity to come back to residential in a big way. We have been able to buy land at competitive rates. We will pass on the benefit of low land to customers. Volumes would be modest, I would not say flat but they would not be very high either. If interest rates start going up it will be a good boost to our sector. Q: Can you give us some clarity about the Gurgaon land? There are frequent reports that you may have to pay a little more because farmers are asking for more compensation, what's the latest. A: We are doing three projects in Gurgaon now. We have already launched our project in sector 91. We have sold about 40% of that and land buying in that part is already done. We launched have also one project in Manesar which is next to Gurgaon for that too land buying is done. The project is fully complete and sold. Construction work is going on full swing. Our third project is a pretty large one, land buying for that is almost 95% complete. About 5% is yet to come and prices are more or less flat. I do not see any reason to pay more to anyone. Q: Channel checks indicate that the farmers could be seeking more compensation that is what the Land Rehabilitation Act is pointing at. What did you pay for all these three parcels? Is there any likelihood that you may have to renegotiate or at least pay because now the situation is different? A: If we go for some new projects then that is a different scenario. But these three are fully paid for and done so we don't see any reason why we will have to pay anything more for these projects. These two are already in the market and we are selling them. We are getting very good response from the market as well. Also, for the third one, we don't need to buy anymore land. Q: As you correctly mentioned the land buying has been completed and that has lead to higher leverage and increase in debt levels. What is the outlook? Do you expect to pare down you debt and also rental income will be important in paring down debt what is the outlook on rental incomes do you expect it to increase in the current year? A: We have already started reducing our debt. From a level of about Rs 1,250 crore debt has come below Rs 1,000 crore. This was possible because of the good response we got when we launched those three projects. We do not need any more money. Land buying is complete now. As far as construction is concerned we are fully funded. We have launched projects, we are getting good money from them. When we launch big project which is by the end of this calendar year we will further reduce our debt. Q: Can you give us an idea of revenue flow that could be seminal in debt reduction? What would be that rate of revenue increases or even earning in this quarter and the next? A: There are two basic revenue streams for us. One is rental income. From the last one and half year our focus was on commercial segment. We have about 5.5 million square feet of commercial area which is fully ready now. About 60% of that is leased out. Company is already earning a rental income of close to about Rs 20-23 crore per quarter. This will rise further by end of this year. Along with that, from the last one year we have started launching residential projects. Manesar was the first one to be launched followed by sector 91 and then Neemrana project. Our revenue stream is pretty decent now. For the first two quarters we launched these two projects so it was not very high. They have been going on in the market for almost one year now. We will be launching big projects in Gurgaon in the third quarter so that is when the revenue stream will go up. We do not see any concern. Our net asset value is close to about Rs 4,000 crore and the total debt is just below Rs 1,000 crore. We are pretty comfortable as far as the ratios go. Q: There is some concern on the super luxury projects that you are supposed to launch in Delhi are they on track. Do you anticipate any delay on that front? A: We are on track. There were some delays on that but now they are all sorted out. Q: The launch starts in? A: The first launch would be by the end of this year and the second by beginning of next year. Both of them would be contributing to an extent to the revenues in this financial year.