Godrej to cut corners in its Ahmedabad township

The change in Gujarat government's township policy has forced Godrej Group to reduce its developable area in its township, under construction behind the Nirma University on SG Highway.

The Godrej Garden City of Godrej Properties was launched with the plan of developing a township spread across 40.4 million square feet of developable area.

As per the previous plan, Godrej had planned to develop 26.3 million square feet of residential area and 14.1 million square feet of commercial and other areas, totaling to 40.4 million square feet or 330 acres of its township in the city. After revised plan, now the company will develop 20.6 million square feet as residential area and merely 3.4 million square feet as commercial and other areas, totaling to 24 million square feet or 250 acres.

Thanks to the upgraded township policy from Gujarat government, the developable area of this township has been now reduced by 24% or 16.4 million square feet (around 80 acres). The total developable area of the township is now reduced to 24 million square feet. Company also announced that it is unlikely to develop its reduced portion of 80 acres of its township.

In the results conference call of Godrej Properties for investors on Friday, the officials of the company including chairman, Adi Godrej, executive director, Pirojsha Godrej among other senior officials announced that the company's decision to reduce developable area in its township.

Adi Godrej announced that changes have taken place in its Ahmedabad and Hyderabad projects and that Godrej has reduced a total amount of approximately 18 million square feet (including 16.4 million square feet in Ahmedabad) commercial development area in the two states.

He also said that the company has retained roughly the same amount of residential development overall. "In case of Ahmedabad, this change has been brought about by the state government's change in township policy - from the Gujarat Integrated Township Policy to the Residential Township Policy - which, has resulted in a lower total FSI. However, it has increased the residential space permissible from 65% of the development to 90% of the development," he said.

Talking about the reduced portion of the piece of the land, Godrej senior said company is unlikely to develop the 80 acres of area. "The project size will also reduce because we are unlikely to exercise our option to develop an additional 80 acres due to the increased costs," he said.

Further stating that residential is easily saleable than commercial, he said: "Commercial property in tier-2 cities would mean very large investments. This change in scheme enables us to do more of residential development which will be easily saleable. And the capital that would have been locked up in the commercial development can now be deployed into other projects which will get us better returns," said the chairman.

Joining the conversation, Pirojsha Godrej said the company has already sold in Ahmedabad 3.5 million square feet in 18 months. "So I think we have already demonstrated our ability to sell in that market. We think demand will increase and we are confident of the project continuing to do well," he said.

Though the state government changed its township policy a year back and the Godrej Group took several meetings with the Gujarat government to discuss on the issue, it finally decided to reduce its size in the quarter, ended on September 2011. Pirojsha Godrej clarified on it and said, "The policy changed last year actually, but there has been a lot of discussion we have been having with the government on exactly how this would be formulated for us. So we have finally got clarity only now and took our board approval before announcing it."