Realty gloom provides consolidation opportunities: Pirojsha Godrej

The corporate tax cut by the finance ministry is a positive step, and the government should not spend too much time worrying about each sector but should make sure that Indian macroeconomic story is firing on all cylinders and overall GDP growth is healthy, says Pirojsha Godrej, Chairman, Godrej Properties. During an interview with Swati Khandelwal, Godrej said, “Affordable housing is a huge opportunity, but I think that it is a poorly defined term and a lot of people are now using affordable housing because it is a flavour to define almost any kind of housing”. Edited Excerpts:

What measures should the government take to help the realty sector? 

There are liquidity issues for the broader segment but I do think the government has done what was needed  Corporate tax cut is certainly a positive step, but I don’t think the government should spend too much of its time worrying about each/individual sector concerns. I think the real estate sector will take care of itself, the auto industry can take care of itself but the government’s work is to make sure that India’s macroeconomic story is firing on all cylinders, the investment is happening.

How has Godrej Properties managed to do well amid all the gloom?

Godrej Properties has a long way to go and there are a lot of things that we could be doing much better. We have had a reasonably good run because of certain things like you are coming from a group with a heritage of very strong brand having a legacy of good governance and a focus on appropriate risk management. We haven’t stretched ourselves to a point where if the market turns adversely we will not be able to manage that. So some of our strategies include not buying land outright and rather partnering with the landowners and using the cash flow from the development to fund the lands. I think that is one of the reasons that we have been able to scale up quite fast without having a too heavy balance-sheet. We have also tried to look at the appropriate time to raise equity to further strengthen the balance-sheet. 

The current period is one of a lot of opportunities while there is a lot of gloom and doom in the sector, but there is also clearly a huge opportunity for consolidation within the sector. We expect that over the next decade or two the industry will grow very fast. 

What kind of opportunities you are eyeing in the affordable housing segment?

The government’s definition of affordable housing today is Rs 45 lakh/unit and certain size limits. So a large percentage of our current inventory does fit into that segment. But Rs 50 lakh homes are still not affordable for a majority of Indians. That’s why we call it as mid-income housing but that is a big part of our business and certainly something on which we would like to focus on. To move into more disruptive and truly affordable housing we do see some challenges on the supply side. If we try to build homes like Rs 10-15 lakh units, then we do think that there are certain challenges to do that in that scale with profitability.

—Zee Media Newsroom