Kolte-Patil has signed its first development management project with NOW Realty’s for its Baner project in Pune.
Sujay Kalele, group chief executive officer says the realty company will earn anywhere close to 8-15 percent margins of the collections accrued from this project's sales.
The company has collaborated to develop NOW Realty residential project ‘Sereno’ that offers 0.6 msf of saleable area.
Below is the verbatim transcript of Sujay Kalele’s interview to CNBC-TV18’s Nigel D'Souza and Reema Tendulkar
Nigel: Could you give us a margin picture, when you work as a development manager what are the margins because just looking at it in the last quarter itself it was in the 20’s. So as a development manager what are the margins on the projects?
A: As a development manager our remuneration is linked to the sales pricing. The percentage hovers between 8 to 15 percent of the top line, linked to the collections. The costs related to the development of the project taken by the landlord/developer.
Nigel: So the margins that you are getting in this particular project as a development manager will be lower than what you have been getting in the past?
A: No they will be around the same number, slightly higher because we are not linked to the costs of the project. So whatever fee we get adjusted for the corporate overheads, as to the bottom-line. So the margins will be slightly higher.
Reema: Can you tell us what the project size is so that we can do the calculation of the 8-15 percent development fee?
A: The project is 0.6 million sqft of which the first phase of 0.3 million sqft we have already launched. It will be a co-branded project, we are targeting an average sales price of between Rs 9000-10000/sqft.
Reema: At what point will the development fee accrue to Kolte Patil, will it be per launch, can we expect some money to kick in in FY15 itself?
A: Yes absolutely. From this quarter itself because the development management fee is linked to the collection so as and when we collect from the customers, we get paid as a percentage of whatever is agreed. So we will see some addition from this quarter itself.
Nigel: So it comes to around Rs 55600 crore on a rough estimate?
A: Yes Rs 52500-55000 crore.
Nigel: So if we take an average of around 13-15 percent of that it should be roughly around Rs 80 crore that you earn at an EBIT level?
A: Yes, pre tax.
Nigel: Going ahead do you see more such projects coming into your books or will you go back to what all you will be doing in the past?
A: We are evaluating opportunities as and when they close we will obviously announce but this is our first development management project and hopefully we should sign few more.
Nigel: So we can look forward to a few more in this financial year or in the next financial year?
A: That is anybody’s guess actually.
Reema: So the best case will be a management fee of Rs 80-90 crore for Kolte Patil on this particular project?
A: Yes and the worst case at 8 percent will be about Rs 40-50 crore.
Reema: You are expecting this whole thing to come in in FY15 itself?
A: No it is phased out, as an when we collect. So the project duration will be four years so it will be spread out over four-five years.
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