Budget housing is fast becoming big business with more and more real estate companies trying to please the masses with pocket-friendly offerings. Mahindra Lifespace Developers Ltd, the real estate and infrastructure company of the over $11 billion Mahindra group, has kept low-cost housing under its radar and is in the process of acquiring appropriate technology to make a grand entry into this segment.
“We are exploring possibility of entering into affordable home segment. One can’t succeed in this business by constructing 600 units. You need to build 10,000 homes a year. We are looking at that kind of size,” said Anita Arjundas, managing director (MD), Mahindra Lifespace Developers.
“We need the technology for sustaining large volumes,” she added. Mahindra Lifespace Developers has already created a name for itself in mid-segment and luxury homes in several key markets in India and affordable homes business would substantially scale up its operations.
“This (affordable homes) requires scale. We need to look at the process. We need to find the appropriate technology to build such homes under tight budget,” said Arun Nanda, chairman, Mahindra Lifespace Developers. Large scale volume can only make such projects profitable because of the wafer thin margins in this segment. At a time when land and material prices are galloping, innovative construction technology and use of low cost materials can make all the difference for building budget homes.
The Tatas have already mastered the skills to excel in this business and have been building projects under the brand name Shubh Griha and New Haven in joint ventures with land owners to keep costs under control. Even Bangalore-based realty firm Purvankara projects are into this segment through its associate company Provident. As per government data there was a shortage of 24.71 million (over 2.4 crore) all types of houses in the 11th plan (2007-12) in urban pockets of India and it is not known as to how many them have been constructed so far.
Mahindra Lifespace Developers believes that the housing sector would further grow this year due to continued demand from all sections. In the financial year 2010-11 the company fared well due to rising sales and timely execution of projects. On Saturday the company announced its financial results and the board has recommended a dividend of 50 per cent on equity share capital as compared to 35 per cent last year reflecting its more than satisfied performance. For the year ended March 31, 2011, the company reported a 46 per cent growth in operating income at Rs 476.56 crore as against Rs 320.65 crore in the previous year. Its net profit grew by 30 per cent to 103 crore as compared to Rs 79 crore in the previous year.
During the January- March quarter, the company’s operating income went up by 62 per cent to Rs 164 crore as against Rs 101 crore in the fourth quarter of the previous year whereas its net profit was up 29 per cent at Rs 30.49 crore.
The firm also reported a consolidated operating income of Rs 612 crore, a 46 per cent rise over the previous year and its consolidated net profit was at Rs 108.17 crore, up 38 per cent over last year.
Sales of residential units by the company together with those with its subsidiaries for the year stood at Rs 700 crore, up 19 per cent than previous year’s Rs 590 crore. During the year the firm sold 1.41 million sq ft of land.
Nanda said the company’s two Mahindra World Cities – integrated business cities – near Chennai and Jaipur are progressing fast and the company is in the process of setting up two more such World Cities in the future.