JOIN USGodrej Properties sees strong sales this year despite COVID-19; cash flow may pose challenges
Buoyed by record sales bookings of Rs 5,915 crore last fiscal, realty firm Godrej Properties expects to repeat its strong performance on sales front this year despite coronavirus pandemic, but sees cash flow as a challenge due to slow construction activities.
In an interview with PTI, Godrej Properties Executive Chairman Pirojsha Godrej said there will be a slowdown in the industry but people who want to buy properties during this time will certainly prefer real estate companies with strong financial capabilities to execute projects.
"Our sales bookings in the first two months of this fiscal have grown over the last year. Even during the last 10-15 days in March, we had quite a lot of sales," he said.
The national lockdown was imposed from March 25 to curb the spread of COVID-19, bringing construction activities as well as physical sales to a grinding halt.
Godrej expressed confidence that the company would have another good financial year in sales perspective despite the current situation.
"We hope for a good performance this year as well. Hopefully, we can do even better than that," he said when asked about sales bookings outlook for the current fiscal.
The company is witnessing quite a lot of interest from prospective buyers, particularly non-resident Indians (NRIs).
Godrej Properties has been witnessing 10-15 per cent sales bookings by NRIs through digital route, he said, adding that this experience helped the company a lot during this lockdown period.
Godrej, however, said the cash flow situation and speed of construction would be challenging this year.
"Cash flows will be something that we need to focus a lot on. Its two months now, and barely any construction has happened. In this industry, cash flow is linked to achieving certain construction milestones," he said.
That said, the company does not have any liquidity issues as around Rs 2,000 crore cash is in the balance sheet, with a healthy debt-equity ratio, Godrej stated.
Asked about the overall impact on the housing market, Godrej feels that the residential segment might not be severely affected, as widely believed, despite the tough economic scenario.
"Most people are expecting the residential segment to do extremely badly this year. My own view, while we have to wait and watch and that may be the case, I would not take that as a given," he said.
"Obviously economic sentiments are weak, people will be somewhat reluctant to commit for big ticket purchases. People are losing jobs, salary cuts are happening, so affordability will worsen.
“But, on the other hand, the kind of security home ownership offers, it becomes even more attractive in a pandemic like this," Godrej observed.
One would have to wait and watch to see how it plays out between economic difficulties and having a security of home ownership, he said.
Godrej said the government has taken a lot of measures on the supply front, but there is a need for demand-side intervention. He suggested that stamp duty/GST rates should be relaxed for the next six months to encourage people to invest in the property market.
On the launch pipeline, Godrej said the company has not launched any new projects during the last two months and rather focusing on selling inventories in existing projects through attractive payment plans.
However, Godrej said the company is holding on to its guidance to launch 15 million sq ft area during this fiscal year compared to 11 million sq ft in the previous year.
He said most of the launches could get bunched up in the second half of this fiscal year.
This is not unusual for the company, he said, adding that even during the last fiscal year, its fourth quarter sales bookings were three times higher than the first quarter sales.
"We can make up for the lost time in the second half," he said.
Godrej Properties has acquired many projects, either outright purchase of land or through joint ventures with landlords, in the last three years across major cities -- Delhi-NCR, Mumbai, Pune and Bengaluru.
"We have a strong portfolio. Our focus now will be launching these projects and generating cash flows from these projects," Godrej said.
However, he did not rule out acquiring more projects if there are good opportunities in the current market situation.
"The sector was already facing a crisis. The coronavirus outbreak is a double whammy to the sector. Overall, the sector will have sharp liquidity issues. The process of consolidation will become faster," he said.
Meanwhile, Godrej Properties, the real estate arm of business conglomerate Godrej group, posted a net profit of Rs 267.21 crore on a turnover of Rs 2,914.59 crore during the last fiscal year.
On the operational front, Godrej Properties' total sales bookings rose to Rs 5,915 crore last fiscal year from Rs 5,316 crore in the previous year, possibly the highest booking value achieved by any publicly listed real estate developer in India in FY20.