Plans to move out of Kochi, Mangaluru too
Mumbai, November 25
Godrej Properties (GPL) has exited the Hyderabad market and will move out Kochi and Mangaluru residential projects as well, as it looks to penetrate deeper in four core markets.
“In keeping with our goal of avoiding new projects in cities where we haven’t launched a project, we have exited the Hyderabad market. This will free up capital to invest in the top four markets,” said Pirojsha Godrej, Chairman of Godrej Properties. The four markets where the bulk of GPL’s future investments will be directed are Mumbai, Bengaluru, Delhi-National Capital Region (NCR) and Pune.
In Kochi, the company does not own the land and has been working in a joint venture. “So you won’t see us launching that project. It is a matter of when we agree on terms to exit the city. In Mangaluru, the first phase has been completed. We are in discussion to figure out how to handle the subsequent phases and whether we will develop them. But certainly we don’t see, beyond this project, any continued presence in Mangaluru over the near-term,” he added.
Big four of housing
The top four cities account for over two-thirds of residential real estate sales in India and continue to see demand expansion.
“The ability to scale our operation there (in non-core markets), from an absorption perspective, is relatively limited compared to our focus cities,” he said.
However, the company will keep an eye on the Hyderabad market, and when it achieves relatively substantial scale in the four market, it could re-enter the city.
Godrej said the availability of funds through the company’s private placement and low gearing ratio give it an opportunity to disproportionately scale the project portfolio over the next 12 months.
The company has brought down its debt level from ₹3,137 crore on September 30, 2017 to ₹1,539 crore now.
Alongside, its average borrowing cost is down from 8.10 per cent to 7.88 per cent.
“The current market conditions where there has been an increase in funding costs and fewer refinancing lines for smaller developers presents ideal conditions for well capitalised developers like us to expand,” said Godrej.
“Overall, we don’t think that the current market conditions present a bad operating environment for us.
“In fact, I think the relative advantages to the stronger players in the sector only increase as difficulty in terms of liquidity and other things increase,” he added.