The rise and rise of Prestige Estates: How the realty firm bucked the trend

At the end of last year, Irfan Razack, chairman and managing director, Prestige Estates Projects, a real estate firm in Bengaluru, made it to the list of new-minted billionaires. The company’s share prices soared over 2019 and the Razack family’s 70 per cent stake in it ballooned to a value of Rs 8,800 crore. 

In other words, in a market where most real estate players are struggling, where pending IPOs have been scuttled and high-value customers have hit the brakes on spending because of economic uncertainty, Prestige Estates has been flying high. 

How did it pull off this feat? 

One reason is that Prestige has not exposed itself to the more competitive markets like New Delhi and Mumbai. The other reason it has managed to buck the trend, says Razack, is that the company avoids rolling funds as a matter of principle. “We don't use cash flow from one set of customers for a project to fund another one. We are definitely more measured in how we expand,” he says.

Razack also says that while the billionaire status has a nice, “feel-good” factor and is certainly a milestone, in his view, it is Prestige’s “relationship with vendors, employees, and other stakeholders that is worth the real billions.”

Anuj Puri, chairman of real estate advisory firm Anarock Property Consultancy, says: “Prestige has projects in good locations, invariably in close proximity to main roads; it has the high recall value of a well-entrenched local brand, and in terms of diversification, a good portfolio of rent-yielding assets, including office and malls, which helps to fund residential projects.”

Most of Prestige’s projects in Bengaluru launched in the last three years were located along the upcoming metro lines. These include: Prestige Falcon City, Prestige Park Square and Prestige Elysian.

 

Ramesh Nair, country head at property consultancy Jones Lang LaSalle India, says: “Prestige buildings are usually built to the highest standards and hence they are sought after by corporates like Deloitte, Apple, 3M, Boston Consulting, and Accenture. Most of their commercial projects demand a premium over average market rents and have less than 5 per cent vacancy.”

Clearly, Prestige Estates has benefited from the fact that the southern markets have been more stable than, say, Mumbai. 

Gulam Zia, executive director at property consultancy firm Knight Frank India, says: “Prestige was busy strengthening its base in southern markets while others were spreading themselves thin with over-ambitious plans to grow across the country. Bengaluru continued to dodge the gloom over the realty sector and Hyderabad continued on a growth trajectory giving a boost to Prestige’s business.”

How does Prestige avoid delays and projects going amiss? 

Razack puts it down to being involved. “Every Tuesday and Thursday the first half of the day is spent visiting sites under construction in Bengaluru. And then once a month, I spend an entire day at locations outside the city,” he says. “The mantra is to be hands-on. When you’re there regularly, everything works differently.” 

Over the last two years, Prestige has developed a total of 24 million square feet of real estate annually. The company has another 50 million square feet under construction and execution this year. These projects include a mix of hotels, commercial real estate, malls and residential units. 

Though Prestige has stayed away from Mumbai, which is the most valuable and  competitive market of all, Razack says that over the next three years the company will invest Rs 1,000 crore in a handful of projects in the city, including developments on Pali Hill, in Bandra Kurla Complex, Mahalakshmi, Mulund and Byculla.

The entry into Mumbai could test Prestige’s resilience. “Entry into new markets, specially the high-risk market of Mumbai, is a challenge for anyone,” admits Zia. 

“However, their timing couldn’t have been better, considering that the real estate sector is currently passing through its worst phase, enabling them to capitalise on the upswing that it is bound to witness in the near future.”

Razack, too, is confident. “Whatever we commit, we deliver on. That is the key to long term success in realty even if it means incurring losses sometimes,” he says. “Word of mouth is just as strong in this business as it is in the food and restaurant business — perhaps stronger. So trust only comes with performance and delivery.”