With Rs 3,000 cr cash in hand, Godrej eyes properties in prime locations

It is filled with what is now a rare commodity in real estate — cash. With this advantage, Godrej Group’s real estate arm, Godrej Properties, is looking at buying land in prime locations, investing in development management contracts (DMs) and do a record number oi launches.
 
In June, it raised Rs 2,100 crore through Qualified Institutional Placement, only the second realty developer to do that this year.   Early this month, the company announced a joint venture (JV) with a local developer for a housing project in Navi Mumbai — it will develop a 7.5-million sq ft project on a 100-acre parcel, about three-fourth the size of Mumbai's Bandra Kurla Complex.
 
And, announced three more projects this month. “We are betting big on high quality locations and large land parcels. We are the only company which can do it,” Mohit Malhotra, managing director, told Business Standard.
 
Earlier, it had acquired the once-iconic RK Studios in the Chembur area of Mumbai from the famed thespian's family for Rs 150 crore; it is building a premium project on this. It also signed a JV with Omkar Realtors & Developers early this year to build a sea-facing luxury housing project in Bandra, one of the most costly localities in the city.
 
Their strategy is currently contrarian to the market, where developers are cutting on launches and preferring to clear existing stock, to generate cash and repay dues. The year 2019 has seen a 14 per cent decline in housing launches at 136,998 apartments, compared with 159,452 in 2018. The October-December quarter saw a 31 per cent fall at 26,405 homes, contributing majorly to the overall decline, according to consultancy JLL.
 
Malhotra said land lots now come with a 40-50 per cent discount compared to the hey days of real estate. What is helping the company do these big deals is its cash and strong brand, he said.
 
“We have Rs 3,000 crore cash in our balance sheet. We will deploy Rs 5,000 to Rs 6,000 crore over the next two to three years,” he stated.
 
Last month, the company’s chairman, Pirojsha Godrej, said they would be launching 13-14 new projects or new phases in existing ones in the remainder of the year, a record for the company.
 
Malhotra said the company was also doing a new version of DM contracts, wherein it invests 50 per cent in the land of the project; it might or might not charge a fee for this. In normal DM, a company lends its name, does the construction and marketing for a fee which is 12-15 per cent of a project’s revenue.
 
“DM works where partners have strong balance sheets. Today, not many partners are so available. That’s why we invest our own capital in the land,” said the MD.
 
In Pune, it did a deal for a DM under the new model; it will develop 25-mn sq ft.
 
Analysts say there is risk involved in the company’s JV model - it mostly does these and disgruntled partners could go to court.  Malhotra concedes it is not easy to do JVs but says they examine all issues diligently before signing.
 
“We are a 30-year-old company and are doing 30-40 JVs. All are going smoothly. We take proper care in selecting the right partner,” he said.

BIG PLANS

1.  Goderj Properties recently signed a joint venture to develop a 7.5 million sq ft project in Navi Mumbai
2. It earlier acquired the iconic RK Studios in Chembur area of Mumbai from Raj Kapoor’s family
3. Godrej Properties is launching 13-14 new projects or new phases in existing ones
4. In Pune, it did a deal where it signed a DM contract under the new model, where it will develop a 25 million sq ft
5. It raised Rs 2,100 crore early this year through QIP

       Source: Company