Buyers come even in bad times if you’re a credible player: Abhishek Lodha, MD, Lodha Group
After demonetisation hit the real estate sector sales in November-December 2016, Abhishek Lodha , MD of Lodha Group, says the first few weeks of 2017 have seen buyers starting to come back to the market. In an exclusive chat with Vinod Mahanta and Kailash Babar, the young scion of the group, India’s largest developer by sales, points out that in this tough market, only credible players with a consistent delivery track record will attract homebuyers. ..
How affected was real estate sector by demonetisation? What impact did it have on your company’s performance?
I certainly feel the initial shock has worn off. People have understood this was a short-term negative, and all the pain was frontloaded. But the medium-term benefits will be an economy which is more transparent, tax collections will be higher, hopefully lower fiscal deficit and therefore lower interest rates. People are slowly starting to understand that this initiative will help the Indian economy, and consequently, the real estate. The recent cut in interest rates has reduced EMIs anywhere between 5% and 7% for various borrowers. The lowest EMI in the market was about 9.15% as on December 30. Today it is 8.35%, which is down by a 0.8%, which is effective EMI reduction of 5.5-5.6%.We definitely felt the short-term impact of demonetisation. But as market leaders, we have done quite well. We sold 400 units each in November and December. And in January this year maybe we’ll do 500, so we are close to our actual run rate. There was 20-25% fall in the months of November-December. But people have kept coming in, kept buying,which tells us that there is real demand in the market. We handed over 6,500 homes to customers last year. This year we will hand over 7,000 homes. I believe if you have a consumer’s belief and trust, then even in tough times they are willing to buy.
The sector is undergoing a transformation through regulatory reforms like Real Estate Regulatory Authority. What impact will it have on the sector and your company?
We believe there is a very significant trend in the market of buying only with credible players. It doesn’t have to be big or small; you could be a small but credible player. It is all about credibility. GST, and more importantly RERA and demonetisation, are going to strengthen this trend, because very few players have the staying power. The capacity and the financial resources will emerge strong from demonetisation. In the months of November and December,we increased our construction spend. When at most other sites in the country, labourers were running away, we were getting them to come to our sites. If you have the strength and the wherewithal in the toughest of times to keep moving ahead, then customer has the confidence to buy from you.
Leading rating agencies have downgraded your corporate ratings, citing weak liquidity position and high financing risks. Will it affect funding?
Our debt rating continues to remain at investment-grade levels. The agencies in their report very clearly mentioned the reason, which is driven by their perception that demonetisation will slow down demand. So, we continue to enjoy investment-grade ratings. And you know,these are national events — demonetisation. We believe that if somebody has taken a view that demonetisation is going to affect the economy, that is fair enough. We don’t have a quibble with that.