We plan to capture just 4% of market in 4 years: Prestige Estates' Irfan Razack

'Layoffs and cut downs at the global level tend to bring more work to India, leading to higher office absorption here.'

Bengaluru-based Prestige Estates Projects recently said it aims to double its annual residential sales bookings to Rs 25,000 crore by FY26 from its current markets and others such as Mumbai, Pune and National Capital Region (NCR).

The company’s chairman and managing director Irfan Razaq tells Raghavendra Kamath about his plans to achieve the target and outlook for the real estate market.

Isn’t Prestige’s sales booking target of Rs 25,000 crore very ambitious, given the high interest rates and talks of a slowdown this year?

The Indian real estate market absorbed over 450,000 units in 2022.

Our plan is to capture only about 3.5-four per cent of the market, which should be Rs 25,000 crore of annual sales in FY26.

Further, annual sales of Rs 25,000 crore are strategic and well distributed among key cities in India.

We expect to achieve about Rs 20,000-crore sales from cities with existing presence such as Bengaluru, Mumbai, Hyderabad, Chennai, along with others (Kochi, Calicut, Goa, Mangaluru and Ooty).

We expect another Rs 5,000 crore from expansion into new geographies, such as NCR and Pune, where the company plans to expand in the next six months.

Interest rate hikes do affect market sentiment but only in the short term.

But this will have long-term effects for at least the next three years.

What is giving you the confidence to expand in Mumbai, NCR and Pune? Are you seeing better prospects in these cities than your home markets?

We are not compromising any growth in our home markets to pursue ambitions in Mumbai, NCR and Pune.

We have factored in 50 per cent growth in our current markets.

It is from the current number of about Rs 10,000 crore annual sales contribution to about Rs 15,000 crore, going forward (60 per cent of Rs 25,000 crore).

Mumbai, NCR and Pune are great markets, both in terms of value and volume.

We expect close to Rs 10,000 crore (40 per cent of Rs 25,000 crore) of sales from these markets.

Prestige is expecting incremental rental income of Rs 25,500 crore from offices/malls by FY28. This would require Rs 15,900-crore capex. How do you plan to fund it?

The rental income expected is Rs 2,500 crore from commercial projects and Rs 500 crore from retail projects, totalling Rs 3,000 crore of rental income (annuity) combined.

We have Rs 22,000 crore free cash flow visibility from our residential projects pipeline.

This comprises ongoing projects of 44 million sq ft and upcoming projects of 73 million sq ft.

We plan to commit 40 per cent of the residential free cash flows to fund our capex requirements.

The shortfall will be serviced through debt.

We have shared a comprehensive capex outlook with our investors, wherein the net-debt-to-equity will be at 0.47 by FY28.

Do you plan to float any real estate investment trusts (REITs) for your annuity assets?

Currently, we are committed to building an annuity portfolio from the present Rs 460 crore in FY23 to Rs 3,000 crore by FY28.

In the future, we are open to opportunities related to REITs, as it is a good capital unlocking option.

There are concerns about hiring slowdown, as well as higher interest rates impacting leasing in the country. How do you look at the issue from the Prestige Estates Projects (PEPL) perspective?

We do not see any slowdown so far as leasing activity or request for proposals (RFPs) are concerned.

Last year, India absorbed 45 million sq ft of office space and we expect this number to continue going upwards.

We are comfortable about our position with respect to office leasing.

For example, our Bengaluru office pipeline has a cumulative 12 million sq ft of leasable area to be leased over three-four years.

Bengaluru absorbs 15-16 million sq ft annually. So, we only need to lease about 20-22 per cent of the market absorption annually.

We leased a 3 million sq ft leasable area in CY22 and are confident to achieve our leasing numbers comfortably.

How are the layoffs by US tech companies expected to impact office demand in India?

Layoffs and cut downs at the global level tend to bring more work to India, leading to higher office absorption here.

We do not see that metric impacting the demand negatively.

What are your plans for FY24 in residential and commercial?

We are planning to launch 32 million sq ft of projects across various cities in India during FY24.

We also plan to complete 18-20 million sq ft of development in the same year.