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Demand for quality homes intact

In a depressed realty market, where sales in the residential segment continue to trip, Mumbai-based Lodha Group is among the few who continues to close high-end deals like the R2,700-crore DLF land purchase and launch luxury homes like the recent ones in its upcoming New Cuffe Parade designed by international designer Philippe Starck.

In a depressed realty market, where sales in the residential segment continue to trip, Mumbai-based Lodha Group is among the few who continues to close high-end deals like the R2,700-crore DLF land purchase and launch luxury homes like the recent ones in its upcoming New Cuffe Parade designed by international designer Philippe Starck. Abhisheck Lodha, MD, Lodha Group, speaks to FE?s Shubhra Tandon on the company?s strategy and whether these high costs are sustainable in the current challenging economic environment. Edited excerpts:

What is giving you the confidence to do high priced land purchases like the R2,700-crore DLF land and launch such high-end products at a time when there is uncertainty in the global economic environment?

As a country, India continues to grow. Whatever it may be 5%, 6%, 6.5%, 7%, but it is growing. The growth is significantly in the urban areas, and the current housing stock there is in quite a poor condition.

All these factors, when put together, show that people have an inherent desire to live in good quality homes. Homes, which are well designed, well thought through, with good amenities, easy to access and well finished. Whether it is R25 lakh, R5 crore (starting price for the newly launched Philippe Starck homes) or more, quality matters most. Last month, we sold more than 11 lakh square feet or more than 1,200 apartments in just one month.

How are your profit margins like in times of rising costs and bleak demand?

The impact on margins has been moderate. Over the course of last one year as our construction has progressed, and we have spent over R2,000 crore on construction, we have been continually been able to move our prices up, even in what is perceived to be a tough market. And the demand continues to remain strong. We have also been able to reasonably combat the upward pressures with the combination of value engineering, improving our procurement practices, controlling wastage and doing everything that a real manufacturing company will do.

What is the plan on the DLF land that you purchased?

It will be a mixed-used development, primarily residential. We should be coming in the market with that product in the first quarter of next year.

You were looking to tie up with a private equity player for it; so, have the talks moved?

We have been fairly successful in already tying up our funds, so at this point in time we are not sure of a private equity investment.

What is the plan for fund raising in fiscal 2012-2013?

The company had generated R1,500 crore of free cash flow last year. If this year it continues in the manner it has, the number will be higher. So, there is no plan at the moment to raise any external finance, except the normal construction finance that comes from the banking sector.

How much have you invested so far in 2013 fiscal and what is the plan going forward?

We have invested R3,500 crore in land acquisition so far and I think we are done with bulk of our purchasing for this year. As for construction, this year we would edge up around R2,200 to R2,300 crore. Part of this will come from customer advances and the balance will be loans.

What is the sales target for the current fiscal?

We hope to have R7,000 to R8,000 crore of new sales. Our average selling price will be between R8,500 and R9,000 per square feet, so that will translate into about 8-8.5 million square feet.

What is the status of your US consulate deal where you are buying Washington House in Mumbai?

That deal is in the final stages of documentation. The transaction value is R375 crore.

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First published on: 16-10-2012 at 00:35 IST
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