‘Real estate is a slightly complex business’

Mumbai-based Lodha Group probably ranks as the most diversified real estate developer in the country, with homes at every price point.

It has delivered over 20 million sq ft and has over 35 million sq ft under development with a land bank of 5,300 acres.

In November, it bought the landmark MacDonald House in central London from the Canadian government for Rs 3,120 crore.

In a chat with Business Line, Abhinandan Lodha, Deputy MD of the group, spoke about the market and how the spread of his product range is an effective hedge against market fluctuations. 

Excerpts:

The markets are up, growth is down and banks are stretched. How do you see your prospects in these trying times?

We have been lucky in the sense we are Mumbai-based and 97 per cent of our value lies here. Mumbai, being an island city and the financial capital, has robust demand as long as you have a credible name to deliver. What we have been doing over the past 4-5 years is to build an organisation with a lot of credibility with both consumers and suppliers. And, we have an asset pool across the spectrum. We have an apartment for Rs 30 lakh and one for Rs 100 crore, and everything in between. We are selling something at every price point. The range enables us to hedge our whole portfolio.

How is the mix?

Forty per cent is in the affordable category, 15 per cent in aspirational and 35 per cent in the luxury segment. About 8-10 per cent is in retail, commercial and the rest.

Sales are poor in Mumbai realty…

The market has not shrunk. It has grown about 6 per cent over the past year in size.

It is just that the market share has got re-allocated and some sections of people have chosen to buy ready apartments rather than those under development due to the risk profile attached to some developers.

Reports indicate an inventory of 58 months in Mumbai. Even if discounted to 40 months, isn’t it quite high?

My only contention is that if this inventory is that high then there should be some negative movement on the price at some point of time or there would be offers given. There is generally a slowdown in sales, but the months of inventory may be a little off the mark.

We delivered 5.5 million sq ft last year and 4.5 million sq ft this year.

For example, in Lower Parel, everybody would say, if you have, on an average, 2,000 apartments to sell, it would work out to 70 months’ inventory as one cannot sell over 25 units a month there. We sold 1,200 apartments in 60 days.

In Mumbai, there is a population which wants to buy and has the money and desire to buy. So, if the market is shaken then the concept of inventory disappears.

In Palava (a 4,000-acre suburban township of the Lodhas), I was selling 40 apartments in a month when we launched it. Now, the sales are 800 units a month.

How much do sales accruals help fund your projects?

It depends on how you look at it. For someone like us it is the backbone. Our model is that we are not an asset owner but an inventory owner. We need to continuously sell like a factory where you produce and sell. We have an annual accrual of about Rs 9,000 crore.

The budget for the year?

It is around Rs 8,800 crore.

Any plans to move into other cities?

No. We have Mumbai, and Pune and London will be an important part of our business going forward. We intend only to complete the projects we had taken up in Hyderabad.

When are you going to start work in London?

By the middle of June. We will have the plans frozen by April.

There are reports of delays in some of your projects. Is it because of the economy or delays in approvals?

Real estate is a slightly complex business and the supply chain management is not as efficient as it should be. There have been delays in some of our assets. A few of our projects have been delayed and we have informed our consumers, rescheduled and delivered them.