What works for Godrej Properties’ projects even in slow realty market
Photo Credit: Shah Junaid/VCCircle

At a time when real estate developers, especially in the National Capital Region (NCR), are struggling to stay afloat, Mumbai-based public listed company Godrej Properties claims it has sold villa units worth over Rs 300 crore at its newly-launched project—Crest—in Greater Noida in a single day.

Crest, which is the maiden offering of the developer in Noida/Greater Noida and seventh in the NCR market, forms part of a large township project Godrej Golf Links. A joint venture between ACE Group and Godrej Properties, the project has seen sale of over 6 lakh sq ft of area at the time of launch. 

The development comes at a time when sales have been on a downhill journey in NCR. As per latest data available from real estate consultancy firm Liases Foras, NCR saw a drop in sales by 5% in the first quarter of 2016-17 on a quarter on quarter basis. The overall sales across top eight cities dropped by 1% during the period, the data showed. 

Pirojsha Godrej, managing director & chief executive officer, Godrej Properties said, “We consider Noida a critical growth opportunity for our company and hope to have many more successful launches in the city. We will do everything possible to ensure we deliver our Godrej Golf Links customers an outstanding and innovative project.”

The healthy response to its project is not surprising. The developer has garnered significant traction for its other projects also in the recent past, all at a time when the market has been lukewarm. Late last year, it sold 300 apartments at a project in a Mumbai suburb within a week of its launch, bringing some much-needed cheer to a sector struggling to attract buyers.  

While the fact that Godrej has seen units go off the shelf across its projects is not surprising, what intrigues stakeholders is its ability to tide through tough market condition.

Brand equity matters

So, what works for the company? It’s the brand equity and test of time. Analysts say that buyers tend to be more careful about track record, brand value and corporate governance standards of a company in a slow and tough market. In contrast, in a healthy market when consumers are bullish and economy is in good shape, anything and everything sells. 

In the NCR market, where a slew of developers are facing fraud, cheating and other serious cases brought up by home buyers, Godrej stands to benefit given its better positioning.

Pankaj Kapoor, managing director, Liases Foras, said that a developer takes weeks and months to market a project and garner significant traction on it. "Its not easy to clock healthy sales numbers given the state of affairs. But Tatas, Mahindras and Godrejs of the world find themselves in a better situation given their corporate entities. What is also playing out interestingly is how they are lending their names to smaller developers in different micro markets," he added.

The other set of tier II & III developers in the region find themselves trapped in a debt cycle as cash flow crunch has forced them to go for multiple rounds of refinancing. This has not only raised questions about their sustenance in the market but also on falling standards of corporate governance and delivery track record.

No wonder, the NCR market has seen a slew of lesser known realtors piggyback on branded, pedigreed companies to monetise their land parcels through joint ventures and joint development agreements. The joint venture between ACE Group and Godrej Properties is a case in point. 

But, Godrej is not the only developer to have seen healthy traction across its projects even in the current market situation. Mumbai-based privately-held developer Lodha Group has also claimed to have clocked surprising numbers across its projects lately. The number of such realtors, however, is few and far between.

This is not to say that Godrej and Lodhas of the real estate world don’t face concerns regarding project delays and debt concerns. But it’s a choice between a developer who has shown some track record versus one that has only made tall claims. 

Numbers don’t lie

Godrej Properties, which is currently developing commercial and residential projects spread across 129 million sq ft across 12 cities, clocked revenues of Rs 333 crore in the first quarter of financial year 2017, up 45% on a year-on-year basis. Its profit increased by 9% to Rs 43 crore during the same period. 

In the first quarter, it witnessed total booking value of Rs 387 crore and total booking volume of 592,715 sq ft as compared to total booking value of Rs 1,251 crore and total booking volume of 1,321,385 sq ft in Q1 FY16. 

On the residential front, it recorded booking value of Rs 312 crore and booking volume of 549,720 sq ft while commercial projects recorded booking value of Rs 75 crore and booking volume of 42,995 sq ft.

To tap into international home buyers, the company recently opened an office in Singapore, its second offshore set up. It has an existing arrangement in Dubai for NRIs. 

The developer has also set up a fund management arm – Godrej Fund Management – along with Dutch pension fund APG Asset Management to scoop up capital for its ongoing and upcoming residential projects. 

Like this report? Sign up for our daily newsletter to get our top reports.

Leave Your Comment(s)