See substantial launches in Q4FY18; HDFC deal to bring more capital: Prestige Estates

He said, HDFC Cap’s total commitment is for Rs 2500 crore – a combination of both equity and debt, and Prestige Estates share would be 25 percent of overall contribution.

Under this partnership, the properties will mostly be in urban areas and by next 60 days few deals will be on ground.

Margins for affordable housing and those for their  legacy business are the similar, he said, adding that with affordable it depends on the over ticket size but as long as it is priced right and built right, it may not be mediocre and will be similar to our other projects for mid-income group. Don't expect margins to be eroded due to affordable housing, he said.

The actual growth can come from affordable housing because that is where the market is, said Razack.

Talking about their guidance of 10 million sq ft launches for FY18, he said in the last nine months they were hit by Real Estate Regulatory Authority (RERA) and other legislation but currently 2-3 large developments have been approved and so Q4 will see some substantial launches, which will help meet the target and also boost sales, said Razack.

Below is the verbatim transcript of the interview:

Q: Tell us about the partnership. Give us some details, how much are you eyeing in terms of this segment now?

A: This is a strategic partnership that we have done. It is a platform deal with HDFC. It gives us more strength to tie in more lands and get into mid segment housing and this is across Pan India, whichever city we feel is going to give us enough returns. We are currently looking at some lands in Bengaluru, Hyderabad and maybe going forward in other cities in the west and north also, but for the time being the commitment is there and this will be a good strong partnership which will infuse more capital into the system and help us to grow the business more.

Q: How much money in it and when does it start flowing in?

A: It is almost immediately. We have already inked the agreement and now we are evaluating several properties. We have even shortlisted a few. Unfortunately I cannot spell out those details now but we are on track to tie-up few properties which we will be working together in and it is a partnership which I am sure will add credibility and also will give us that much more strength to work and it is a combination of more equity than debt. So it is a win-win situation both for us as well as HDFC Capital.

Q: How much do they bring? How much do you bring?

A: Their commitment is Rs 2,500 crore and it is a combination of equity and debt and we also have to chip in our share and our share would be roughly about 25 percent of the overall contribution and that helps us to add up more money in the system.

Q: This land that you are buying, in terms of timeline by when do you think you could close some of those deals and also will it be mostly in urban or are you looking at even semi urban areas?

A: It will be mostly urban areas and we are looking at some large transactions and in the next 60 days we will have few deals which will be happening on ground and then we can move to the next step.

Q: What are the margins in affordable housing vis-à-vis your legacy business?

A: Margins would remain the same. Affordable housing is more on the size of the unit, on the overall ticket size all of it but I always say as long as it is priced right and build right it need not be anything which is mediocre. It will be similar product that comes from our stable which is the mid-income group and at the end of the day it’s the customer who will be happy with the product and at the same time margins for the company will not erode.

Q: What kind of growth are you seeing in the affordable housing particularly and do you think that it could get boosted because in the Budget we did hear that the government has asked builders not to charge any goods and services tax (GST) from home buyers that are buying affordable houses. Will that help and what is your target as far as industry growth in affordable housing is concerned?

A: Affordable, mid-income housing is where the market is, where the demand is, where the actual growth can come from. So we are looking at some large numbers. The most important part is once you have identified the land, got into it, it is about conceptualizing and getting the plans approved. Where we hit roadblocks is certain times the approval process becomes slow. I am not talking about one single approval. It is the overall gamut of approvals that we have to get and that is where the overall process becomes a little slow like environment or even the local bodies everything else. If all that is speeded up, government is committed to do it at a faster pace and that way even the cost also can be brought down because the holding cost comes down and that will help us coming to the market quickly and again encashing on the overall demand and it becomes a win-win for all the buyers as well as the sellers.

Q: Didn’t you guide for 10 million square feet launches. We didn’t notice too many in the Q3. Will you be able to deliver?

A: Yes, we did guide for 10 million sq.ft but unfortunately we got hit by RERA and other legislation that came in. Now the good news is we have got two-three large developments which are finally been approved, which have been logged in for RERA and this quarter I believe that we will have some substantial launches and that will add up to meeting the overall target of the guideline that we have given and also it will boost up the operational highlights of more sales during this quarter. We have got one project which is approved and lined up for launch in Chennai, two in Bengaluru. So all three put together are large and they will add up to a substantial amount of area that will be launched too.