Godrej Properties sees room to scale up Mumbai home market business

Godrej Properties has rejigged its Mumbai management team and brought in a new chief executive

Godrej Properties is looking to scale up its business in the Mumbai home market, after rapidly expanding in National Capital Region (NCR) and Bengaluru.

The company has rejigged its Mumbai management team and brought in a new chief executive to focus on Mumbai operations. It plans to launch mid-income housing and a fair amount of premium housing in Mumbai, the company’s chairman, Pirojsha Godrej, said during a conference call with analysts last week. “I think it is a very big market in Mumbai... if we were rating our own performance in the city, we would honestly give ourselves a pretty low grade,” Godrej said.

The company has 27 projects in Mumbai with a development potential of 38 million square feet and nine projects with 16 million sq ft under construction. The company hopes to go to market with at least 4-5 launches in the near future, Managing Director Mohit Malhotra said. Godrej said there was no reason for its sales in Mumbai to be at the levels that they are currently at. “So, we have taken a look at where some of the areas we have not done well.”  

Anuj Puri, chairman, Anarock Property Consultants, said MMR, which had the presence of several leading developers, saw less activity by Godrej Properties. “The time is right for them to increase their presence across MMR, given that consumer demand for large and listed players is on a high,” Puri said.

Redevelopment, land buys

The company is also looking to focus on redevelopment projects in Mumbai like other top developers such as Oberoi and Tata Realty & Infrastructure. “We are looking at both joint ventures and society redevelopment projects in Mumbai where there’s some exciting discussions underway,” Godrej said.

Godrej said the company is looking at some land purchases where the land parcels are coming in at a good value and with attractive payment terms. “I wouldn’t say there is distress valuation, but certainly we think there are some attractive opportunities and we think the timing is interesting because most developers continue to be struggling with liquidity issues,” he said.

The company raised Rs 3,750 crore last year through QIP to buy land and make related payments. “We do think it’s a good time to be investing that capital and land markets probably will start tightening in a year or two. So, I think the more of it that we can get done within that 12-to-24-month timeframe, the better it will be,” he said.

Over a medium to long-term horizon, Pirojsha said he thinks this could be a very interesting opportunity for the company to create an REIT (real estate investment trust) to other such structure where Godrej will have a minority stake, but in a pretty sizeable venture, as some of the REITs that have listed are examples of similar structure.

The company undertakes commercial developments only in partnership with Godrej Fund Management and its institutional capital partners, where its stake in these projects is 20 per cent, thereby limiting the total capital lock up that it needs to put into these projects, but also allowing us to benefit from the long-term value creation, he added.