Mumbai: With land in possession for building over 50 million sq ft, the real estate arm of the Shapoorji Pallonji is now shifting focus to the residential space.
In a chat with BusinessLine, Venkatesh Gopalkrishnan, President (Business Development) and Chief Investment Officer, Shapoorji Pallonji Real Estate speaks of the move towards the residential segment and the current market conditions. Excerpts:
Reports indicate over-supply in many metros and flagging sales. What does this imply?
If we go by the rest of the market, pricing is going to be a challenge. Sales will slowly pick up. Job security has to be there as also disposable income. Right now, the economy is settling down. Real estate will pick up only when the GDP picks up.
Investor driven markets come and go. The long-term market will be in line with how the economy grows. From the political and economic perspective, we are positive. Things will take a few years. For groups like us we would like to plan for the next 10 years.
In terms of real estate, the level of activity, development and focus on affordable housing is only going to keep growing.
Home loans rates are running high. What impact does it have on real estate growth?
Real estate is more GDP-sensitive than interest rate-sensitive. The correlation of real estate growth with GDP growth is far more than with the interest rate.
One would not wait for a half per cent cut in interest rate to buy a home. However, this is not to say home loans do not matter at all.
What are your plans going forward?
The new additions will be mostly in residential middle-income housing of between ?3,000 and ?5,000 a sq ft, and also above ?5,000 to ?10,000 a sq ft across cities. The plan is for 20 million sq ft of development in the ?25-50 lakh bracket, three to four million sq ft in the mid-income to high-end and 1.5 million sq ft in the high-end segment.
Traditionally, Mumbai has been our stronghold. Besides other areas in the suburbs, we are looking for land in the Vasai-Virar corridor, Panvel and Bhiwandi, apart from areas in Pune and Chennai.
In Kolkata, we are building the country’s largest housing project of 20,000 homes and have delivered about 6,000 units. The project is public-private-partnership with the West Bengal Government. Ideally, we would like a project with more than 1.5 million sq ft spanning over five years of development.
In the above-?5,000-a-sq ft category, where are you looking to expand?
The company has a 50-acre project in Bangalore of 5 million sq ft. This apart, focus will be on Mumbai, Pune, Chennai, Delhi, Gurgaon, Chandigarh and Hyderabad. The first affordable housing project will be in the East and it will be about 2,000 homes.
Where are you sourcing funds from?
We are not over-leveraged. We have financial partners wanting to work with us. This apart, we take construction finance from banks. We have $250 million from the Canadian Pension Plan Investment Board for buying a leased asset and servicing it. We got it less than a year ago and are looking to deploy it.