The company currently operates in nine cities across India, including its recent entry into the NCR region. It has also acquired 12 acres of land in Thane, where it will soon launch.
With several joint development agreements and direct transactions, a significant portion of future business will be driven by redevelopment projects, he said.
On September 12, the company acquired the redevelopment rights to Miami Apartmentsa prestigious company located in Breach Candy, South Mumbai.
The site spans over 2,000 square metres and marks Puravankara’s debut in the exclusive South Mumbai real estate market.
Market sources estimate that property prices in the area range between ₹1,25,000 and ₹1,40,000 per sq ft.
The current market capitalization of the company is ₹10,671.74 crores.
This is the verbatim transcript of the interview.
Q: It is not just the Breach Candy project, you are also looking at a joint development in Andheri. There is a land buyer, which is happening. There is a joint development deal in Bengaluru, which you have informed the exchanges about. On the redevelopment part, there have been a number of announcements in the last two quarters as well. Has it already started contributing to your sales now? If not in two to three years, what percentage of your total sales would come from redevelopment?
A: We have been very active in acquiring, both in Bengaluru and Mumbai, in the redevelopment projects. Currently, we have not launched the redevelopment projects, but we have about five projects underway in the western region between Mumbai and Pune. We intend to bring these redevelopment projects to market from this fiscal year, and we hope that between this fiscal year and the next, we will be able to bring all these projects to market.
Read also | Puravankara acquires 7.26 acre land in Bengaluru’s Hebbagodi with ₹Development potential of Rs 900 crore
We estimate that over the next three to four years, we will see, on an increasing scale, 30-35% of our business coming from the western region. Also, as we continue to grow in Bengaluru and the markets we are present in, there will be a lot of catching up to do for our team across all markets. And we are excited about the redevelopment projects we are looking forward to launching.
Q: What percentage of the total sales value will be represented by the remodel? How much of that 30 to 35% would the remodel contribute?
A: We expect 15-20% of the total business (we are currently present in nine cities in the country and are also entering NCR). On a larger scale, we expect at least 20% of the business to come from refurbishment. We have just acquired a land of about 12 acres in Thane, which will also come up on the market. So, given all the acquisitions and all the direct transactions that we are doing, I would expect 20-25% of the business to come from refurbishment spaces.
Q: How will this focus on Western India, Mumbai, Pune, etc., change your margin profile? And some of these projects, like the one in South Mumbai, will have a much higher average sales volume.
A: Our entry into Mumbai will ensure that our average turnover will increase significantly. And the project in South Mumbai, or the one we have in Pali Hill or the one in Lokhandwala, if we look at the trend, we are present in all areas of Mumbai. All of them will contribute significantly in terms of absolute numbers, both in turnover and margins per square metre.
Read also | Puravankara Q1 Business Update: Company reports 39% growth in collections over last year
So we will see an increase in contribution and absolute margins and realization of both in the coming time in general terms. This will have a very positive impact.
Q: How much higher are the margins on a redevelopment project compared to a project where you just bought the land and are constructing a building, and what is the difference in the time period from when you get approval to redevelop a building to when you finally build it?
A: Two parts. One is that, as far as margins are concerned, you typically see that in a direct transaction where you own the land, the margins are typically higher. These are EBITDA (earnings before interest, taxes, depreciation and amortization) figures that range from 28 to 35%.
But if you look at redevelopment, it would be lower because even though you don’t pay upfront for the land, there is a significant cost of approvals that have to be incurred and of course the rent – all those costs are there, which are upfront costs before you launch. But you would see a typical EBITDA number of 22-24% as far as redevelopment projects are concerned.
Although you will spread your expenses between the land, which goes towards building the members’ area, the rental corpus and the approval costs over time, even then the result will be around 22-24%.
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