We're bullish on growth prospects of real estate sector: Puravankara CEO
Consolidation has become far more severe this time around than what it was a year back. The pandemic has only increased the velocity of that consolidation
image for illustrative purpose
The real estate industry has been hit hard during this pandemic period. However, organized and branded players have increased their market share during this period. Bengaluru-headquartered realty player, Puravankara, has seen the demand coming back in the industry post the second wave of the pandemic. The company, which didn't have any launches last year, plans to launch 14 million square feet of projects this fiscal year. The real estate company has also entered into plotted development projects through the launch of 'Purva Land'. In a conversation with Bizz Buzz, company's CEO Abhishek Kapoor said that the firm has reduced its debt substantially in recent years and is confident of garnering a bigger market share as consolidation happens in the industry. He also said that demand is coming back in the industry on the back of conducive interest rate environment
While the demand is not back fully (as compared to pre-pandemic level), it is important to note that the demand is concentrated around some of the well-organised, structured and branded players who have shown performance in terms of delivery. So, the demand may not come back to the pre-pandemic levels, but the market share of these companies has gone up
We have been the early adopters of technology. We have the right skill-sets and mindset for adopting technology. We are constantly investing in technology. This has enabled us to launch an online booking platform last year. We have been deploying a substantial amount of capital on the technology side.
You have taken over the role of CEO at Puravankara at a very crucial juncture for the real estate industry. What are your views on the growth prospects of the company and industry?
It's a milestone for the organization because we are embarking on a different journey. We are bullish on the growth prospects of the industry for the next three to five years. If I compare this first quarter (Q1 of FY22) to same period of last fiscal, the numbers are obviously much better. Given the pandemic, we had no new launches and these are all sustenance projects. As the business was better-placed in the second wave than the first wave, our numbers were better than the first wave. Now, we see real estate demand is coming back. Obviously, there is pent-up demand and there is also environment. The environment is very conducive because the interest rates are down, the government is also trying to boost the expenditure, and the developers are giving great deals. While the demand is not back fully (as compared to pre-pandemic level), it is important to note that the demand is concentrated around some of the well-organised, structured and branded players who have shown performance in terms of delivery. So, the demand may not come back to the pre-pandemic levels, but the market share of these companies has gone up.
What are your plans in terms of new launches this year given the demand for projects developed by organized players is high?
We have multiple launches this year and that confidence comes from the fact that even if we increase price, we continue to see higher sales. If you increase prices and sales don't happen, then that's a challenge. In that sense, we see positive sentiment as people are willing to take a decision. They are not sitting on the fence because of the environment today. People are aware that it is a great time to make a buying decision. That is enabling the current momentum. As far as launch is concerned, we are planning to launch 14 million of new launches in multiple markets between Puravankara, Provident and plotted development.
Post-RERA, a lot of consolidation has happened in the market place. Does this pandemic accelerate the pace of the consolidation?
Consolidation has become far more severe this time around than what it was a year back. The pandemic has only increased the velocity of that consolidation. Because, just before than NBFC crisis has happened and before that, RERA got implemented. So, it has been the constant direction of the industry. I believe that it is going to be more severe. So, are there opportunities (for acquisition)? The answer is yes. Leverage is something which one has to be very careful about. If you see in our case, our debt has come down substantially. The cost of capital has come down consistently. Our debt to equity ratio has improved. We intend to continue in the same direction. I also want to say that debt is a function of how much production you have on the floor. So, as we do more launches, we may take more debt. But, players like us are very much careful about our capital structure.
What are your plans for 'Purva Land', which is plotted development wing of the company?
We are very excited about the growth opportunities. We did our first launch last year during the first wave of the pandemic. We sold out 80 per cent at the time of launch. We feel that with players like us now entering into the market, this product category will increase and the market will be a lot more structured than in the past. Reliability of the title, reliability of the infrastructure will create a larger market. This category will be a significant contributor to our growth going forward. In fact, out of the 14 million square feet of launches, around 4 million will be the new launches in the 'Purva Land' category. So, we are very optimistic about the growth of 'Purva Land' going ahead.
How much investment Puravankara is doing on technology given the fact that role of digital interfaces is growing in all areas of real estate sector?
We have been the early adopters of technology. We have the right skill-sets and mindset for adopting technology. We are constantly investing in technology. This has enabled us to launch an online booking platform last year. We have been deploying a substantial amount of capital on the technology side.
How is the current inventory level? If there is a sudden spike in demand, will your inventory level able to absorb it given the fact that there are no new launches last year?
Our current inventory level will be able to absorb the demand. I think, the big advantage for us is that we have different product categories. We have the ability and bandwidth to take the new demand.
That's why we believe that new launches will add a lot of value to the current pipeline we have. These new launches along with acquisitions will strengthen our profit and loss account and balance sheet.
