On behalf of Arvind SmartSpaces Limited I sincerely thank you for yourcontinued support. It has now been a decade since our independent journey in real estatestarted and for me it has been incredibly humbling to serve you all.
Key trends in the industry
The year 2019-20 was characterized by global economic slowdownaccompanied by slowdown in India's economic growth as well. Indian real estate sectorhas been going through turbulent times over the last few years owing to the structuralreforms initiated by government such as demonetization RERA GST and IBC. While thesereforms have brought about much needed transparency and accountability in the sector andwill prove to be beneficial for the overall health of the sector in the long run thesehad brought about challenges in the near term. The real estate sector was seemingly comingout of these challenges in 2019 with marginal increase in y- o-y sales bookings across top7 cities during the year. Sales of residential units across the top seven cities grewmarginally by 1% in 2019 on y-o-y basis. Launches on the other hand grew by 23% in 2019over the last year.
Developers continued to focus on affordable and mid-market segment withboth sales and launches exhibiting a strong orientation towards affordable and mid-marketsegments. The industry also continued to see demand consolidating in the sector.
The year 2019-20 also saw brisk activity on the investment side withinstitutional investment in real estate sector going down by 13% y-o-y. The decline ininvestment was mainly due to the sharp decline
in investments during the January - March 2020 period when thepandemic started to spread across the globe.
However the year ended in a grim note with an unprecedented pandemicinduced by Covid-19 which brought all economic activities to a grinding halt in the lastmonth of the financial year.
I am happy to report that the 2019-20 fiscal despite all thechallenges mentioned above your Company continued to do quite well. The same is indicatedin our overall sales performance for the financial year 2019-20 where we have achieved apre-sale of Rs. 286 cores an increase of 3% over the previous year. Your Company hasalready delivered ten projects of around 4.2 million sq. ft. and have other nine projectstotalling 14.7 million sq. ft. under various stages of development which would becompleted over the next 3-4 years.
You will be happy to know that during this year we did a strategicplatform deal with HDFC Capital Advisors Limited a wholly owned subsidiary of HDFC Ltd.and one of the most respected real estate private equity firms in India. The platform willfocus on the development of affordable and mid-income housing projects in India. Theproposed developments will be undertaken by a special purpose vehicle "Arvind HomesPrivate Limited" with proposed investment of Rs. 250 crores between the partners. Thestrategic platform not only de-bottlenecks capitalization at the Company it also hasenough flexibility inbuilt to ensure that long-term patient capital is made available tothe business without putting undue pressures on its balance-sheet to take care of shortand medium business cycles.
Another significant achievement during the year was a successful launchof our new 130 acres villa development named Forreste in Ahmedabad. This project is beingexecuted by the Company on Development Management model. We saw an excellent response inthe project with entire phase 1 inventory worth more than Rs. 100 crore being sold outwithin 2 weeks of launch.
Let me now talk about the strategic priorities that we will focus ongoing forward:
1. Maintain conservatism in financial leverage:
Our strategy of being conservative in financial leveraging has workedwell for us. Especially in the last 2 years when many real estate companies struggled tomanage its cash flow due to first the liquidity crunch and then the Covid pandemic yourcompany has been able to manage its cash flows well. This has also helped in keeping itscost of debt at very healthy levels.
2. Optimize operational costs:
We have initiated a strong cost optimization program and relooking atall our operational costs threadbare. Some of the key initiative being undertaken includetaking up some of the design and construction activities by in-house teams strictmonitoring and optimization of utility expenses reducing overhead expenses.
3. Customer centric:
We continue to remain focussed on product design and innovations. Forenhanced customer experience we continue to partner with best in class agencies forArchitecture Landscaping and designs. The company ensures on-time delivery of theprojects with benchmark in cost efficiencies. Value for money for the customer continuesto remain and important pillar of our overall strategy.
4. Pick up on new land acquisition in H2 FY 21:
Due to Covid and lockdown not much acquisition activity could beundertaken in the first half of FY 21. However we remain strong in our intent to scale upour business and intend to pick up on new land acquisition in the 2nd half ofthe financial year.
5. Push on LTVC (long term value creation) projects:
We intend to develop more projects like Forreste which are landoriented can deliver value over long term and require less upfront capital investment. Inaddition to launching new phases in Forreste we have plans to launch another large scaleplotting project in Ahmedabad during this financial year.
While the immediate challenges driven by the pandemic and economicslowdown are evident we remain hopeful on the outlook for the real estate industry.Activity levels in the mid-market segment and land oriented developments have alreadystarted showing of improvements. We expect demand to rebound strongly in the next fewquarters driven by improved affordability lower interest rates growing interest from NRIsegment due to currency depreciation and increased preference of people to buy instead ofrent. The trend of consolidation in the industry will further accelerate and reputedplayers with strong balance sheet are likely to gain disproportionately from this phase.Backed by the strong brand name of "Arvind" the credibility achieved throughalready delivered projects strong balance sheet and nimble approach to managing ourbusiness we are well poised to take advantage of the next phase of growth in the sector.I am positive that you will share my optimism and enthusiasm as we take next step forwardin this exciting journey.
With warm regards
Kamal Singal MD & CEO