Puravankara plans prefabricated housing plant

Puravankara Projects Ltd (PPL), which is looking at tapping the affordable home segment in a big way, is planning to set up a prefab housing factory in Bangalore.

The facility will come up close to the site of its affordable housing project and cost around Rs 40-50 crore.

The real estate firm’s low-cost housing subsidiary Provident Housing has already acquired the technology for prefabricated housing from Singapore-based Subarna International Consultancy Pvt Ltd.

Ashish Puravankara, director of PPL, said his company would soon be setting up these factories at its various affordable housing project locations to expedite project delivery.
“We have got the technology (from Subarna) and will be setting prefab housing factories on a need basis for our future (affordable home) projects,” he said.

Puravankara also said the company had not yet zeroed in on foreign a partner for its affordable housing projects. Mexican-based developer Homex is reportedly the leading contender for such a partnership.

“We are in talks with various companies for the tie-up in the affordable homes segment at the moment,” he said.
PPL’s low-cost housing arm is on a lookout for an international homebuilder engaged in the affordable housing segment to speed up its project delivery to 10-12 months through use of technology.

Such a move would also help it widen its reach in low-cost homes to Rs 8-22 lakh from the current Rs 15-22 lakh.
Analysts Suman Memani and Ronald Siyoni of Religare Hichens Harrison in their report on Wednesday said PPL’s proposed alliance with a foreign firm and its collaboration with Subrana for prefab housing will lead to a massive jump in revenues from affordable housing arm.

Memani and Siyoni expect further ramp up in earnings from low-cost housing in FY11.

“We expect Provident to launch 6 million square feet (msf) in Bangalore over the next quarter and a total of 30 msf in 2011 as the benefits of its international partnerships materialise,” they wrote in their report.

In all, the company aims to build around 65,000 affordable homes across 60 msf in the next 5-6 years.

But as the realty firm chases volumes to improve cash flow through its affordable housing strategy, it may see some erosion in its margins.

“While PPL earns a standalone Ebitda margin of 30-35%, Provident is likely to earn lower margins of 22-25%. However, cash flows in affordable housing are likely to pip those in the mid segment due to speedy delivery,” said the Religare analysts.It will speed up delivery, push cash flow but squeeze margins