Tag Archives: Chairman

Realty business may become group’s biggest venture in 10 years: Godrej

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Adi Godrej, Chairman, Godrej, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty-Agencies: India’s diversified group Godrej says its fast growing realty estate business could become the biggest venture for the conglomerate in the next 10 years.

“The real estate business is growing much faster than our other businesses. In next 10 years, it will be one of our bigger businesses. Its possible it might become the biggest business,” Godrej Group Chairman Adi Godrej told PTI in Johanesburg.

Godrej Properties, the realty arm of Godrej Group, follows a joint venture model with land owners for development of the real estate projects, he added.

Godrej Group has interests in various businesses, including real estate, FMCG, industrial engineering, appliances, furniture, security and agri care.

Established in 1897, the group posted an annual revenue of nearly Rs 22,000 crore in 2012-13 fiscal. Godrej Properties’ total income grew by 28 per cent to Rs 1,048 crore last fiscal.

“In our group, we have our growth projection in what we called 10 by 10. The group should be 10 times in 10 years. This we enunciated about three years ago. To be 10 times in 10 years, you need to have a compounded annual growth rate of 26 per cent,” he said.

“In the last three years we have grown at around 30 per cent. So we are on track. This year we may grow a little less because economically things are not the best. But overall we expect 10 by 10. Our chemical business is growing little slower,” Godrej said.

When asked about its real estate business in India, Godrej said the company has about 35 projects in 12 different cities.

“Last financial year we added eight new projects and this year also we added some,” he said.

Godrej Properties has presence in cities like Chandigarh, Kochi, Mangalore, Nagpur, Mumbai, Delhi, Kolkata and Chennai.

Godrej also favoured the real estate regulation bill provided it does not hamper growth of the sector.

“…regulation in some ways is good because it brings some discipline in an industry but regulation is bad if it tries to over control things…I have not got chance to study in details, it is still being looked into but so long as it doesn’t interfere with initiative and growth, I think it may not be a bad idea,” Godrej said.

Asked about some developers being not comfortable with the proposed law, he said, “There are some issues that I am sure will be taken up”.

Guinea pigs in the funding market-IV

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Track2Realty, Track2Media, India Real Estate, Valuations of Real Estate, Realty News, Property News, Ravi Sinha,Track2Realty Exclusive: Real estate has not just been innovative but also aggressive in raising money. They have raised money against sales with a guarantee that if the price falls, they will buy it back. It has been a protection on the bank’s side that if the prices fall, of course there is a margin of about 20% and if the prices fall more than that, they will buy back. 20% has been the cut off because about 10% is the expense in buyback, brokerages, paperwork etc.

If a buyer begins to suffer beyond 20%, then they are willing to buy back at the price they bought it. It is a very effective way of raising money because a particular developer in Mumbai who had employed this method was able to sell 45 flats within 3 weeks at a time when the markets were particularly bad.

Pranay Vakil, Chairman, Praron Consultancy admits the sector has a real problem of funding the developers and a real problem of funding the buyer. The buyer because he may want to buy something which is yet to get approvals; because he has an interest rate which is ever changing. From the developer’s perspective, not every developer has this luxury of tying up with a JV partner because a JV partner, the land owner is looking for a brand.

“Time wise, we may be at the worst time trying to raise money as a real estate company. As far as influencing the RBI, this is something which we can look towards for the right kind of developers, for people who want to use and not misuse the funds. I am sure you cannot paint everyone with the same brush. Raising money from banks for land buying is almost impossible unless it is an SEZ or something where the development has to be completed in a very finite time period. Some of that funding is possible but not for the agricultural land even if it is going to get automatically converted under the town planning acts,” says Vakil.

If the IPO is difficult, banking is difficult, venture capital turns into vulture capital, there are not many options left. The options are to go to a real estate fund or a PE fund, discounting of receivables is an option but these are short term fixes. For a medium to long term fix, sector will have to bring pressure on the government to permit REIT, to let the pension funds in, by legitimate developers doing legitimate developments and then only the need of the industry will be met.

Real estate needs some very stable funding from venture capital and mix of maybe equity and debt and obviously vulture funds have to be kept out. The sector needs pension funds coming into India which have long horizons, which are not hungry to get out early and come with very stable rates and are very strong.

Realtors need to give them comfort and they are there to give them money. Unfortunately, real estate has thus far not been able to give comfort to these funds to come into India.