There's a case for price correction, but major cut ruled out: Pirojsha Godrej

Interview with Managing Director, Godrej Properties

For the quarter ended September, Godrej Properties, the property development arm of the Godrej Group, recorded 5% growth in profit, while a few other realty companies posted drops in net profit. Pirojsha Godrej, managing director of Godrej Properties, spoke to reporters after company announced its results: Edited excerpts:

How do you explain the five% growth in net profit in the September quarter?

During the quarter, our revenues and Ebitda (earnings before interest, tax, depreciation and amortisation) growth was higher than the growth in net profit, primarily because of higher minority interest (profit after tax pertaining to private equity partners for project-specific special purpose vehicles), compared to the corresponding period last year. We accounted for minority interest of Rs 26.33 crore in the second quarter, against Rs 16.36 crore in the corresponding period last year.

The company bought 49% stake in a project from HDFC Portfolio Management Services.

We bought back the stake from HDFC PMS in our Chennai project for Rs 116 crore.

What about the other income of Rs 13.86 crore?

Other income includes income from temporary investment of surplus money from projects/rights issue in fixed deposits with banks and mutual fund schemes.

What is the progress on the commercial project in Bandra-Kurla Complex?

Godrej Bandra-Kurla Complex is progressing well; construction is moving ahead of schedule. We have already sold about 2,00,000 sq ft of space in the project. We will also lease some portion of the project.

Have you planned new launches during the remainder of this financial year?

We are planning to launch redevelopment projects in Chembur, Ghakopar and Byculla in Mumbai and new phases in our Bangalore, Pune, Nagpur and Ahmedabad projects.

What is your investment, in terms of your partnership with APG group?

So far, we have made two investments---in Sahakar Nagar I, Chembur project in Mumbai, and the other in the Okhla project in Delhi. We plan to make other investments, too. So far, we have invested about 25% from the Rs 1,000-crore corpus.

How is the real estate market faring?

Sales have been muted in most markets. For volumes to return, we need to see an improvement in the general confidence level and economic growth. 2014 would be better than 2013, as the interest rate tightening cycle may be completed this year. Second, elections would be good for the economy, as a new government would push the reforms process further.

Is there any price cut in the offing?

In the last couple of months, prices have remained flat. But prices in our projects have risen up to 10%. So far, prices have not seen a correction in most cities, but there is a case for price correction. However, the probability of a major price cut is very low.