DELHI: Real estate major Parsvnath feels there are clear indications that residential property prices may rise by nearly 25 per cent in the coming quarters. Pradeep Jain, Chairman, Parsvnath Developers, attributes this to raw material costs, macro-economic conditions, funding issues and the recently passed Land Acquisition Bill. In an interview with Business Line, Jain says the company will focus on executive and fast-track deliveries. Parsvnath is currently working on 49 projects with a total area of 76 million sq ft. Edited excerpts:
What is the signal in the property market, both commercial and residential?
Prices of residential real estate may rise 20-25 per cent. (Basically) because of (rising) cost of raw material as also the recently approved land acquisition Bill. In the commercial segment there was sluggishness, but it is bottoming out. There has been no slump in demand in the residential segment.
So, where will your focus be on — execution or new launches?
In the last two years, we have been focusing largely on execution. We have just launched a commercial project in Connaught Place in Delhi. This project will be built at a cost of Rs 300 crore. We are expecting sales realisation of over Rs 1,000 crore from the project on saleable/leasable area of 1.3 lakh sq ft.
Commercial real estate has seen slow offtake. So, why launch a commercial project now?
In fact, there has been a jump in lease rentals by almost 30-40 per cent. We used to lease projects at Rs 80 per sq ft about two years back. However, this stands at Rs 140 per sq ft now.
What is your current debt position?
Our current debt stands at Rs 1,200 crore. We are targeting to bring it to well below Rs 1,000 crore by the end of this fiscal. The debt reduction will be largely through execution and new launches.
How is the Rail Land Development Authority (RLDA) project shaping up?
It is a mixed-use project. We recently paid the second instalment of Rs 500.86 crore against 38 acre of rail land that we bought for Rs 1,651 crore. We are developing this project in partnership with private equity firm, Red Fort Capital.
Do see the recent RBI notification on interest subvention scheme affecting the residential business?
We launched the ‘House of Happiness’ scheme, in which 25 per cent payment needs to be made upfront and the balance 75 per cent on possession. We received an overwhelming response and have booked more than 700 units under the scheme.
The new guidelines will help streamline the sector and will curb delayed delivery of projects. These will also restrict developers from diverting 80 per cent of the loan amount to other projects. Developers will have to maintain a timeline for construction to get the next instalment from banks.