You can catch up later, Godrej tells competition

Many in the real estate sector have wondered if Pirojsha Godrej, managing director of Godrej Properties, is making a mistake in launching projects at a time when others are lying low due to a slow market.

Unfazed, Godrej Properties has been going ahead.

“Real estate is a cyclical industry and we decided not to be a part of the herd,” says the MD.

During the first half of 2014 (a slow phase), Godrej Properties notched Rs 1,900 crore (Rs 19 billion) of sales, almost equivalent to what was recorded in all of 2013.

It has launched as many as five projects till now this year, against only two in 2013.

Also, recently it sold a little over 250 apartments with an area of 400,000 sq ft within three weeks of launch, of its Godrej Aria residential project in Gurgaon.

Pirojsha Godrej attributes the success to various factors.

“One important aspect is our business model, wherein we don’t invest in acquiring land and can launch new projects without putting in much money.

"We also save on time for converting land deals into required approvals for launching projects.

"And, overall, because of the brand name we carry.”

Godrej has adopted a joint venture model -- it enters into revenue/profit sharing agreements with landowners for developing projects.

“We only wait for the right approvals and launch within weeks thereafter, irrespective of the market conditions.

"Also, in a slow phase, better land deals are available and since it is like a cycle, we expect the environment around to change in one to two years and build a strong portfolio of projects in such a time,” says the MD.

With the JV model, the company is doing more projects with the same amount of capital.

“Growth prospects are much higher and from a risk mitigation point, we can diversify investments into a larger number of projects.

"We are assured of higher returns, though we share profits with the land partner. Our model facilitates larger growth than locking up capital and buying land,” he said.

For 10 years, the company has been growing at a compounded annual rate of 46 per cent, with Rs 1,254-crore (Rs 12.54 billion) revenue in 2013-14, against Rs 29 crore (Rs 290 million) in 2003-04.

Net profit grew 52 per cent annually to Rs 159 crore (Rs 1.59 billion) in 2013-14 from Rs 2.5 crore (Rs 25 million) in 2004.

Pirojsha Godrej is hopeful of a revival in the realty market next year.

”Certainly, things will improve from now on. 2015 will be much better than this year and we expect even this year to end on a better note,” he said.

The company wants to consolidate in its existing markets (12 cities) than entering new ones.

“We think the National Capital Region will grow explosively in the coming times,” said Godrej.

The company launched two new housing projects in Gurgaon this year and is looking to enter Noida soon. It also has two other ongoing residential projects in Gurgaon.

One housing project would be launched in Okhla, Delhi, in 2015-16.

'The company is currently developing residential, commercial and township projects spread across 9.5 million square metres (102 mn square foot) in 12 cities.

Image: Pirojsha Godrej, managing director and chief executive of Godrej Properties. Photograph: Kind courtesy, Business Standard