‘Focus of our start-up fund is to support the technology in realty’
One of the largest real estate developer in terms of sales, Mumbai-headquartered Lodha Developers believes that a healthy real estate segment leads to an equally healthy economy.
Abhishek Lodha, 37, MD, Lodha Developers, says globally over 70 per cent of the wealth lies in real estate and unlike other investments real estate’s value only grows silently compared to other asset classes. Lodha has about 41 million sq.ft. under construction with over 31 projects.
In an interview with BusinessLine, Lodha broadly speaks about the company’s sales and real estate industry. He said the company may be ready for an IPO in 18 months.
Real estate as segment is getting its dues and even the government seems to be focussed on it. How do you perceive it?
Every economy which has grown, has grown in the back of a healthy investment in the real estate segment. Realty sector produces multiple employment and has multiplier benefit. Urbanisation in India is currently at 35 per cent and this is expected to go up by 50 per cent by 2030. That means by 2030, 15 crore houses will be domiciled in urban areas.
The number of homes that were delivered in India last year stood at four lakh homes as against China which delivered 25 lakh. So if 15 crore new homes are required and if you are building just about four lakh homes a year then you see how long it will take to curb the shortage.
How exactly is this in line with your strategy since you operate across categories from affordable segment to uber luxury?
Markets will do well across the board as the Indian economy develops. We do a fair amount of affordable, uber luxury and also office space. Last year, we delivered 6,800 homes and this year, we will be delivering 7,000 homes. Those are staggering numbers for a country where a total of four lakh homes are produced. Two per cent of all homes produced in urban areas are Lodha homes.
You have recently set up a start-up investment fund with a corpus of ₹50 crore. What was the thought behind having one?
We believe that technology is a great enabler and while lot has been done, there is little technology to serve real estate. There are far too many inefficiencies and we believe that technology can help overcome these. The focus of the fund is to support the technology in real estate. We will be investing in companies which will focus on real estate. We expect to deploy the first funding by April-May 2017.
You had set a target of ₹8,000 crore in sales for FY-17. Will you achieve it and what is the target for next fiscal?
Yes, we will achieve that target. ₹8,000 crore is fairly a large revenue and is more than the next two competitors. About 50 per cent of our sales are from units priced below ₹1 crore, about 30 per cent ₹1.5-5 crore and the balance sales is from units priced over ₹5 crore. We are bullish about our growth. We expect sales to grow by 15 per cent in FY18.
Demonetisation seems to have affected sales in the real estate segment. What’s your view on it?
Clearly, demonetisation has affected the overall economy, including the real estate. The industry was fairly affected in November and December but the effects are wearing off.
How is your strategy to acquire land and what is your current land holding?
Land is the raw material of our business and we have to have it. We currently have land where we can develop about 450 million sq.ft.. It translates to about 5,000 plus acres of land bank.
Lodha has got about $350-million funding from Pirmal Fund Management. Where exactly has that been deployed? Also do you see more private equity players coming in?
It is a construction funding and will go into various project construction. Yes, PE are interested in real estate as they look at macro outlook such as real estate, demographics, etc. They are not here for short term.
What is the position of your debt?
Our debt is about $2 billion or ₹14,000 crore against which the project valuation is worth $11 billion.
You been talking of an IPO for a while? Any update on the same and are you looking for some special triggers for an IPO?
We had said about 18 months in December 2016, and we are sticking to that. We may file our prospectus and may look at it by 2018. There are no special triggers and it is a process that most companies have to follow.
What percentage of your sales are coming from the digital vertical?
Digital media add up to 15 per cent of our total sales. We expect more to come from the vertical as home buying age stands at 30. More consumers are doing research on the digital platform. There is a greater pre-ponderous to digital buying in the mid-end of the market besides the international buyers.