You have managed to shrug the weakness across the industry and have posted a pretty good quarter and year. How have you sustained operational strength and outperformance?
I have always been saying it is the team that works. The team has done a wonderful job and we have been able to sustain the entire pressure. It is a combination of several things, a combination of positioning, strategising, getting the right locations, the right product, right pricing and, of course, a lot of hard work from the team.
They have been consistent. They have done well and fortunately we have been in geographies like Bangalore and Hyderabad where things have been very good and that has helped the cost.
How is the commercial real estate space panning out for you? Are trends looking strong in that segment?
Commercial real estate has done extremely well. The office leasing and retail are trading good and we plan to get exit rentals of about Rs 1,000 crore now this year. We have overshot that also and one good thing about commercial leasing is – the vacancy levels are minimal, almost zero and the rentals are also becoming a little stronger.
You are getting a good return on your capex because otherwise on one side there was a time when your capex was going up and rent yield was not being commensurate to your capex. Now, it is almost matching and we are getting a good yield on investment which is quite positive and gives us the courage to do more. There is good demand and that is the good part of it. We see a lot of visibility, even for this current financial year we see a huge visibility.
How are you releasing or rather seeing trends pan out? Are you getting a significant premium to the current rates right now?
In certain pockets in Bangalore, for the leasing, their price has gone up and the outer ring road is now touching around Rs 90 per sq ft. At one point of time 10 years ago, we were talking of Rs 25 and Rs 30 a sq ft and that has really panned out well. Even Whitefield is doing well, Whitefield is around Rs 55-Rs 60 and all in all, it is a positive trend and the companies are willing to pay for good quality grade A spaces and that is the key.
The key is your location and also the type of product you develop. The product should be right, the finishing should be right and ultimately your MNC client should be confident that delivery will happen under committed timelines.
Apart from leasing, there are many large companies who are even willing to buy which is again a good trend and that also adds up to the overall thing. So far, in the current fiscal, we have not done any office sale, but going forward there is going to be a lot of traction on office sales also.
What are the current occupancy rates across your various office property?
It is in the high 90s — may be 95- 97%. Only a few new properties have just got ready and those also more or less spoken for and getting filled up. We have reached almost zero vacancy levels.
What is the current debt status of the company and what steps are you taking for reducing any financial leverage?
Debt levels are there but now it is a question of creating assets and retaining them. Most of our debt on the books is towards creating the capex assets like now we have the hospitality assets, retail malls as well as office. Some part of it comes from internal accruals, the balance is a dependency on debt. But then, these are all self liquidating debt because where the rent goes to pay off the debt, it is a month-on-month liquidation that happens but at the same time, we believe that there should be some methodology where we get less dependent on debt. All the time, we are working on something innovative.
The only way we can do it is to be efficient. Even our residential sales try and sell as much as possible, collect the money which is due to us and overall make sure that the entire organisation is efficient and less dependent on debt. At some point of time, we are working to see that our debt levels come down but that is just work in progress. It has to go up for it to come down. That will also happen pretty soon. But at the same time, I must say we are pretty comfortable on the debt levels. We are able to service our debt and we do not have any stress in the system in terms of cash flows.
Do you believe that momentum for real estate players remains supportive?
Housing in an Indian context is a need. People do need houses. Having said that, I must say in whichever region we are working, there is supply coming in gradually but it all depends on the amount of faith and trust the customer has with you vis-à-vis somebody else. But all in all, there is demand. There is a an offtake and the good news for the buyers is that for them the price points really have not spiralled upwards though now for us as a developer, across the industry with the new GST regime with the input tax disallowance to the developers for new projects, all adds up to the cost.
Net-net what really happens is we have to do a balancing trick. We have to see how we can offer a product which is still affordable which the ticket price which the customer can still afford to buy and at the same time how to keep our costs down and make margins. If we are able to do that properly and offer a decent product to our customers, I think we have won the game.
Going forward, there is enough demand from different geographies and so we are pretty positive. We believe even from whatever guidance we gave in the last year and the current year for this fiscal, we will up this by at least 20-25% more