Plan to grow annuity portfolio to over Rs 2,800 crore: Prestige Estates CEO

Bengaluru-based Prestige Estates Projects is looking to launch a slew of residential projects in FY22 and build its rental portfolio after the first phase of its deal with Blackstone. The company is also entering new geographies such as Mumbai and the Delhi National Capital Region (NCR). Venkat K Narayana, CEO of Prestige Estates Projects, tells Raghavendra Kamath that residential sales will do well due to multiple factors, and that demand for office properties will remain robust. Edited excerpts:

What is your outlook for the company’s residential sales in FY22?

Apart from the inventory of Rs 7503.6 crore, which is a mix of completed and ongoing projects, we have lined up around 15 million square feet of new launches in FY22 in our existing markets such as Bengaluru, Hyderabad and Chennai, and also in two new geographies — Mumbai and NCR. With this kind of line-up, we are looking at achieving a sales target of Rs 6,500 crore.

When is your Mumbai launch?

Prestige Jasdan Classic is about 0.83 million sq ft; construction here has already begun. It will be launched in Q2FY22. Prestige Cosmos, Mulund, which is about 6.50 mn sq ft, will be launched in Q3FY22.

What is the current status of the transaction with Blackstone? When will it be completed?

We have concluded Phase 1 of the transaction (80 per cent of the total value) in Q4FY21. It is a well-aligned capital recycling strategy with financial and strategic benefits. The enterprise value forming part of phase 1 is approximately Rs 7,467 crore out of the total enterprise value of approximately Rs 9,160 crore. Our consolidated net debt has reduced to Rs 1,314.1 crore from Rs 8,464.5 crore in Q3FY21, bringing our debt-to-equity ratio down to 0.19x from 1.47x in Q3FY21. Phase two of the transaction is nearing completion. With that our net debt will be zero and our balance sheet will be strengthened further.

We heard the company is going for a fresh round of capex of Rs 3,000 crore over FY22-25 to regrow its rental portfolio. Can you shed some light on that?

After the transaction with Blackstone, with internal accruals, equity infusions and disciplined capex, we are planning to grow our annuity portfolio from the current level of Rs 314.6 crore to over Rs 2,800 crore in the next five to six years, and will put them into REIT. These projects are strategically located in key micro markets: BKC and Worli in Mumbai; Outer Ring Road and North Bengaluru; Financial District, Hyderabad, among others.

What is the current situation of the office leasing market and what is your outlook? Rating firms said office property demand will be weak and renewals will be a challenge.

Well, the current situation is temporary. Given the strong fundamentals of markets, with growing capital spending on IT/ITES, R&D, and other services, demand for office space will continue to remain robust in India. We have a decent market share in this segment. Between January and April, Bengaluru leased about 3 million sq ft, out of which the share of our company is about 25 per cent. In addition, our office rent collection stood at 98-99 per cent, so we are pretty stable. Around 3 million sq ft to 4 million sq ft of ongoing office projects will be ready by end of FY23, by which time we hope the market will be back to normal.

How do you plan to get customers back to your residential units? Do you see a pent-up demand similar to last year’s once the second wave of the pandemic ends?

Yes, residential sales will continue to do well in FY22. There are various factors attributable to this, such as all-time low interest rates, low GST (goods and services tax), desirability to live in a safe and secure home, among others. Since people are spending more time at home during the pandemic, the demand for houses has been on a rise. Moreover, home buyers are choosing to own apartments with safe gated communities following Covid protocols rather than staying in a rented accommodation. Apart from this, many of our customers are upgrading from smaller to bigger homes. The pandemic has led to changes in the way the apartment communities are designed in the future. All our forthcoming products are well in line with the Covid safety protocols, such as more open spaces, touch-less elevators and a host of other pandemic-appropriate solutions.