Demand revival in commercial realty likely as WFH can't be a permanent phenomenon
Bengaluru-based realty firm is looking at a corpus of `200-crore fund in the AIF
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Century Real Estate Holdings Pvt Ltd, one of the oldest real estate firms in Bengaluru promoted by the Pai family, is also one of the largest realty firms in southern India. With more than 3,000 acres of land bank, the company has been the pioneer in the plotted development project space that has successfully executed many such projects in the last one decade. In a conversation with BizzBuzz, Century Real Estate Managing Director P Ravindra Pai said that the company is planning to launch an AIF (alternative investment fund), for which it has already applied for license from the regulator. This proposed AIF will focus on plotted development space and may have an initial corpus of Rs 200 crore
How is the overall demand environment in real estate space? Has demand revived for the industry?
After the first lockdown, sales were quite encouraging. Despite a nine-month run way in FY20-21, as a real estate firm, we were able to do 2.3 times of our sales compared to the previous fiscal. We have seen record sales growth in our history during August this year as the demand is reviving very fast post the second wave. I would say that this is indicative for most of larger players of the sector.
What has happened during the pandemic period is that while the market might not have expanded, those large players who have good products in the market have garnered a larger share of the market due to consolidation. Sales continue to maintain momentum post the second lockdown. All our segments – plot development, aspirational and luxury-housing are doing fairly well.
We have also seen another trend in the market that people prefer larger space as they spend more time at home. That is leading to good demand in the luxury segment.
What are Century Real Estate's plans in the current financial year?
Currently, we have six residential projects with a built-up area of over three million square feet. We have five plotted development projects with around four million square feet and have two commercial projects with a leasable area of one million sq ft. In the next 6-7 months, we plan to launch two plotted development projects.
Century Real Estate has a long history of successfully delivering plotted development projects. Of late, all major players are entering into this space. What are your views on the growth prospects of plotted development in the real estate sector?
As a group, it is not something which is new to us. In the 1980s, we did a fair amount of plotted development projects, though not in a branded kind of space back then. This is also unique to us as for doing this, you need large parcels of land. It plays well to our strength. In 2011-12, we started doing plotted development projects and since then, the journey has been really good. Today, we have created a niche for ourselves. What are your views on the structural changes that have happened in the commercial real estate space? Can you throw some light on the joint venture arrangement with Prestige Estates for developing some commercial real estate projects?
Our view is that commercial real estate will bounce back, may be with a lag as compared to residential segment. We all agree that 'work from home' can't be a permanent phenomenon. There may be some changes in which commercial real estate operate. For example, people may like to have more spaces. Eventually, the demand for commercial real estate will not go down.
We believe that commercial is a bit of specialised kind of asset class because it is not only building, it is also leasing, relationship with the tenants. That's the reason we tied up with Prestige for development of an office park project. We had earlier tied up with Godrej Fund for similar reasons. Century Group has entered into the financial services space with the launch of its NBFC.
How was the disbursement in last one year during this pandemic period?
Fortunately, we were already cautious as when we got the license, the market had started to turn (due to IL&FS event). So, we were cautious with regard to disbursement. There were two projects to which we had disbursed and the money had been repaid. NBFCs are not the flavour of the day given the environment. And AIFs seem to be in demand.
In fact, we have applied for an AIF license and if we get the license, then we will launch the AIF in next three-four months. This AIF will specifically focus on plotted development. In the first phase, we are looking at a corpus of Rs 200-crore fund in AIF and as promoter group, we will bring in 25 per cent of this amount.
The reason for this AIF plan is that we feel we have the opportunity in the plotted development space and we also have the ability to build. We feel that this is a space wherein we can definitely add value.
What are your plans on the affordable housing space? Do you feel this will be the biggest area of growth for real estate industry?
We are fairly bullish on the affordable segment, which we call as aspirational segment. Given the large land parcels we have, growth is driven by large volumes. Therefore, affordable segment gives us that higher number of sales.
How Century Real Estate is leveraging technology during this pandemic period?
We have digitalised all our assets starting from remote viewing of projects to applying AR/VR for giving a better view of projects to customers. We are also investing in technology to improve efficiency in our internal operations.
