GODREJ GROUP SEES REAL ESTATE TURNAROUND IN A YEAR

While several real estate players are struggling due to demand slump, Godrej Properties believes it has managed to buck the trend. Pirojsha Godrej, Managing Director and CEO of the Godrej group's realty arm said, “Many developers have seen good sales and subdued residential market this year. While the demand environment is subdued throughout the country, I don't think there is any case with absolutely no demand. For the right projects and developers, there continues to be good demand. However, for a more full-fledged recovery, confidence still needs to improve and that will happen over the next six to 12 months. I think in a year from now the industry will be in a much better position," said Godrej, adding that their recent launches in Byculla and Badlapur have seen good demand and the new project 'The Trees' at Vikhroli has created a lot of excitement.

Spread over 34 acre, The Trees is Godrej's first mixed-use development in Mumbai while also being its largest in the city. It has a mix of commercial (9.4 acre), private luxury residential (6.7 acre) and, residential, retail and hospitality space (9.2 acre). The first phase of the development will have 374 residential units of carpet area ranging between 480 and 1,334 sq.ft. and penthouses between 2,043 and 2,465 sq.ft. The pricing ranges from Rs 1.7 crore all inclusive price for a 1BHK unit to Rs 8 crore for a penthouse.

On pricing of the project, Godrej said, "Our sense is that the pricing is very fair. It's not that pricing is low but neither is the cost of doing such a development very low. Here, we are talking about creating a truly world-class environment and hopefully the project will give our customers a sense of the quality of development we want to build," he said. In terms of revenues expected from the development, Godrej said, "We see a revenue potential of over $1 billion (Rs 6,600 core) from this mixed-use development that will be completed in phases over the next five to six years."

While the residential towers will be the first ones to come up, the company will simultaneously work on the second commercial tower. The high street retail park and 5-star luxury hotel is still work-in-progress. "We are seeing a lot of interest from all the major luxury operators for this hotel project," said Anubhav Gupta, Executive Vice-President and Chief Design Officer, Godrej Properties. While Adi Godrej, Godrej Group Chairman had in a recent conversation told DNA that the company would eventually sell their commercial properties even if they were leased initially, it is still not clear if the same will apply to the 5-star luxury hotel asset that will come up in the mixed-use development. "We have not really decided about it yet," said Pirojsha Godrej.

On the real estate market, Godrej said, "I don't think there will be a major price crash over medium term. However, in the short term, anything is possible. One needs to understand that the cost side of the basket for developers has also increased in the last few years. If prices crash, any new project developers won't make any money."

Next question will be, why would the developers do a new project then? If they don't have a choice but to take a haircut they will make some losses and finish the development. So no one is going to bring new projects to market to book losses. "I think we saw a similar thing play out in the commercial real estate space over the last five to six years because there was too much supply in the market. But now things are starting to change because there is no fresh supply and demand has continued absorbing most of what was there, and will now present a situation where demand is now in excess of supply."

Published on 27 th November, 2015 in Hindustan Times may differ from city to city, but by and large I think, the sector will be in much better position in a year.

Recently a Crisil report stated that refinancing of debt has become a big issue for realtors. What is your take?

There is no doubt that there are serious challenges in the sector, especially for the smaller players as the credit environment is difficult and cash-flows are weak. Even in the top set of developers, there are some who are in higher difficulty than others.

After the Abbott deal are you looking at more such asset monetisation deals?

Are you looking at newer markets to expand into?

In a limited sense…We are already in the top realestatemarketsofthecountryandweare now looking at adjacent areas. So in NCR, we have projects in Gurgaon and Delhi, but we don’t have projects in Noida. So we are very open to doing projects in Noida. In Mumbai, there are micro-markets such as Thane, where we are keen to do projects there.

Godrej Properties is looking to monetise more commercial real estate in its Bandra Kurla Complex project in Mumbai to cash in on the revival in the sector, Pirojsha Godrej, Managing DHirector said on Thursday. The company had recently sold 435,000 sq.ft. space in the complex to Abbott for Rs 1,479 crore. Godrej was speaking after launching a project - ‘The Trees’ - in Mumbai’s suburb Vikhroli. Edited Excerpts:

Mumbai’srealestatemarkethasbeenina slowdown for 2-3 years now. How do you see things?

The demand environment is subdued everywhere at the moment. But I don’t think it’s a case that there is no demand. Many developers are seeing good sales in some projects. We have sold more space in the first half of this financial year than in the whole of last year. But for a more full-fledged recovery, confidence needs to improve. It

Hopefully…That was a big deal, where we sold more than what we have left now in that project. I do think that the commercial real estate market is on an upswing, so we should be able to monetise that project completely over the next 9 to 12 months. We currently have a net debt of around Rs 2,200 crore. Over the long-term, we will continue to reduce debt, but that is not a concern at present.

After the RBI rate cuts, have you seen borrowing cost come down?

Cost of borrowing is certainly reducing for the whole sector. Our incremental borrowing isnowhappeningatunder10%,andaverage borrowing cost is now 10.5%.

The recent positive activity in Mumbai's premium residential market could be indicative of a market revival across the country.

When some prominent developers in Mumbai recently announced the launch of new residential projects, they were in for a pleasant surprise with the response they received. Homebuyers were surprisingly more open to closing deals after months of inactivity. While this has certainly set a trend of sorts and created ripples in the Mumbai residential market, it remains to be seen if there will be repetition of the same in the Delhi-NCR and other realty markets. The flurry of activity in Mumbai included Godrej Properties Ltd selling 300 apartments within a week at its flagship project, The Trees, in Vikhroli. The project is a 34-acre mixed-use development project. The first phase of the premium residential component of the project has 374 apartments, of which the companyclaimstohavesoldover80%inthe first week of the launch.

The apartments include 450 sq.ft. one-bedroom apartments and 2,400 sq.ft penthouses. Prices start from Rs 1.7 crore and penthouses cost Rs 8 crore. Prior to this the Lodha Group had launched limited edition residences at World One in Lower Parel and another project in South Mumbai’s Altamount Road where 415 apartments were reportedly sold. Oberoi Realty also claimed to have sold over 500 units during the launch of their Borivali project. Given buyer interest in Mumbai, one would certainly be interested inseeingifDelhifollowsMumbai’sleadandif some activity is seen in its markets. Real estateexpertssaythattherehasbeena30% jump in the number of residential sales in the country compared to the festive season last year, a clear indication that the residential market is looking up. Mumbai has started to lead the recovery process.

In terms of sentiment too, there has been a marked change in the Mumbai market and if it is able to sustain the recovery process for the next five to six months, it will set a benchmark for other real estate markets in the country. “Post the festive season, the sentiment has been positive and buyers are willing to close deals. If the trend in Mumbai continues for the next six to 12 months, Delhi-NCR may start reacting positively and see a turnaround in the next five to six months but much of the offtake will be in the affordable housing segment,” says Mudassir Zaidi, national director, residential agency, Knight Frank India.

Agrees Getamber Anand, President, Confederation of Real Estate Developers Associations of India (Credai). “There is definitely a change in the mood. Housing sales have improved by 15% during the festive season helped by fall in price and lower interest rate on home loans. The launches in Mumbai are primarily new launches. The supply in Delhi-NCR is much more and hence there may be too few new launches. But there is still pent up demand for products in the affordable range.”

Godrej Properties Ltd sold 300 apartments withinaweekofthelaunchofitsproject,The Trees, in Vikhroli, Mumbai

Pirojsha

“Our endeavour is to make The Trees India's most exciting mixed-use development and this partnership (tie-up with the Taj group) is an important milestone towards that goal.”

A Green Wave

With urban plantations, kitchen gardens and farming workshops, city developers are offering buyers new-age eco-friendly initiatives, creating community spaces and targeting the health-conscious.

Forthepastsixweeks,charteredaccountant couple Anshu Agarwal, 35, and her husband Virendra, 38, have taken to starting their day with hot lemon tea - thanks to the availability of lemongrass in the ‘urban farm’ at their residential complex, Rustomjee Urbania in Thane (West). “We were delighted when a mini farm-like garden was set up within the complex two months ago. We can access fresh herbs right here, without having to pay a premium. In a city like Mumbai, this was unimaginable,” says mother of two Anshu.

Likewise, four-year old Darsh Rohindas decorated his house for Diwali with fresh flowers, tulsi and neem leaves plucked straight from a garden within Nahar’s Amrit Shakti residential complex in Chandivli. “This Diwali, we hardly purchased flowers and medicinal herbs; we mostly got them straight from the herb garden in our complex,” says Darsh’s father Neeraj Rohindas. With salad gardens, mini organic farms and outdoor kitchens, several city buildings are turning to new-age initiatives to build greenery within concrete Mumbai.

Expertsattributethistotheongoingtrendsin eco-friendliness in urban cities. “It isn’t new to have access to farm produce or plant your own, but the urban population is now aggressively seeking ways to make this consistently available,” says Avikal Somvanshi, Programme Officer, sustainable habitats at Centre for Science and Environment.“Thereisnowahugeinterestin sustainability, so when given the privilege to get fresh produce at your beck and call, while in urban Mumbai, everyone wants to grab the opportunity. Builders are catching in on to this.” “Other than the obvious health benefits, urban farming gives residents a feel of soil in a crowded city, where packaged products have led to people forgetting about what the idea of fresh food is like,” says Burgis Daruwalla, Chief Designer, Rustomjee Urbania.

Urban Plantations

Residents of Rustomjee Urbania are involved in urban farming, at a dedicated space for organic produce. Currently, the farm includes neem, chikoo, white jamun, banana, guava, tulsi, tamarind, lemon and lemongrass trees. On Saturday, the complex is organising an Urbania Farm Fest, with lessons on home gardening, urban farming and farm cooking for children and adults. “We are exploring the logistics of the whole concept and devising a concrete plan to make the set-up self-operating. Roughly, we plan toallotcertainportionsofthefarmtosections of the building, and have a mentor who can manage and oversee the day-to-day operations at the farm,” says Daruwalla.

Mini Farms

At Nahar’s Amrit Shakti in Chandivli, soil and saplings are provided free of cost to residents, and expert horticulturists conduct workshops to demonstrate basics and ways togroworganicproductsthatcanbeusedin the kitchen. “There is growing awareness among young, well-travelled home buyers on the importance of living among green cover,” says Manju Yagnik, Vice-Chairperson of Nahar Group, a Mumbai-based construction company. “Largetownshipprojectshavetheadvantage of space, and can therefore allot more areas for gardens than standalone buildings.” Nabanita Mukherjee, a banker in Mumbai, set up her own mini-garden at home, with help from the nursery at Amrit Shakti. “I have small plants of tomatoes, green chillies, curry leaves and mint leaves growing in my balcony. I got the soil and seeds from the nursery, and the supervisors there assisted me to set it all up,” says the 35-year old resident.

A Keyhole Garden

This week, Godrej Properties is launching a pilot project called The Trees, at its Vikhroli complex. While the eventual goal is a full-fledged urban farm, in its first phase, The Trees will begin with a prototype of this farm, called a keyhole garden. “This urban farm prototype measures 8.5m by 24m, and is designed to allow residents to plant and harvest trees themselves,” says Anubhav

Gupta,ChiefDesignOfficer,Head-CSRand

Sustainability at Godrej Properties Ltd. The keyholegardenisdividedintothreesets.The first, with seasonal vegetables such as tomatoes, eggplant, okra, bell pepper, Italian basil and so on; the second, leafy and root vegetables; and the third, a tea garden with medicinal and flavour herbs.

“The idea for the keyhole garden is to get residents to participate in the planting of the seeds and harvest cycles, to connect with the land and soil, and to bridge the gap between growing and consumption. We hope to use these as community spaces for people to come and spend time together,” he adds.

On The Fringes

Kalpataru’s Amoda Reserve: A gated community in Lonavla (below), here greenery comprises a fruit park, organic herb and salad garden, among 100 other plant species. “Residents can pick freshly grown ingredients from the fruit-themed garden and from the salad and herb garden. Also, the garden has outdoor cooking facilities for cooking organic meals,” says the company spokesperson of Kalpataru Ltd.

Lavasa: Here, residents can own a mini-garden, or can make the most of the plantation in the inhouse nursery, which spans 12 acres, within the township. “The nursery at Lavasa has dedicated 2 acres for fruits and vegetables and 10 acres for indigenous and ornamental plants,” says Krunal Negandhi, Head of Environment at Lavasa Corporation Ltd.