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2019 would be a great year for real estate sector
Irfan Razack, CMD, Prestige Estates
Jan 25, 2019 | Source: Economic Times
On FY19 outlook: The 2019 outlook will be pretty positive. The supply is coming in slowly because of the new RERA regime. All the supply will start coming in only once the projects are registered with RERA with all the approvals. That will bring a lot of stability into the market. On the demand front, it is a pretty steady. I believe since the supply is lot regulated and demand is also pretty steady, there is a good traction in the market and 2019 would be a great year.
On upcoming projects in Mumbai and Pune: In Pune, we are not doing any residential project at the moment. We are doing an IT park which has now got approved and that will be not for sale. It will be a build and lease model and very soon we will be starting construction there. It is a 800,000 square feet IT park. In Mumbai, we have tied up a couple of properties for residential and the whole idea is to expand and look at newer geographies. There is a lot of scope and advantage being in the Mumbai market and so we have moved in there. We have tied up. The land approval process is on and very soon once the approvals come in, we registered with the RERA authorities for the launch. Hopefully in the next two quarters, we should have a launch in Mumbai.
On the guidance of Rs. 3500-4000 cr for FY19: We are pretty steady. We will reach that guidance and maybe cross it a bit. But so far, the three quarters that have gone by have been pretty strong and the current quarter also looks quite good. We seem to be on course to hit that target and we may exceed it slightly but then that is depending on what new launches we can get quickly in this quarter. But looking at the overall scenario, I think we should hit the target pretty easily.
On projects in pipeline: There are several projects in the pipeline in different cities. In Bangalore, we got a couple of large projects that we are working on but they are all in the process of development, approval and all of it. In fact, we are working on a pretty large development called the Prestige Smart City, it is all now fully designed. It is a combination of plotted development, affordable housing, villa and some retail and that is in Sarjapur. Itis a large township of 185 acres. Apart from that, we are working on a project in Bangalore called Finsbury Park which is again under approval that is again under the PMAY scheme. Hopefully, the approval should come this month. These are the two big ones apart from the ones in Mumbai that we are doing, the Byculla project which is also almost approved, and in the following quarter we should be able to launch it.
On impact of possible GST rate cut: GST is a major debate that has been going on in the industry amongst the consumers. Currently it is 12% on the entire cost to the consumer and plus the consumer also has to pay the stamp duty apart from the GST itself. The developer currently has got the advantage of taking the input credit. But having said that, now there is a move now to say that GST should be brought down to a much lower percentage but then the government is also thinking of not giving the input credit, but if input credit is not given, then costs will go up for the developer. So on the face of it, if you are giving a break on the rate itself and if the cost goes up because the developer cannot get the benefit of input credit, it has to get rolled up and again it will hit the consumer if not directly but in an indirect manner. The policy makers have to look at it in a larger perspective when they are talking of housing for all and not tax the product which is churning the market and providing the employment. It is churning the GDP and at the same time, the consumer is getting an affordable house. Maybe they could do it on a slab basis on the cost of the house. The more expensive the house, the higher is the tax and the lesser the price, lower the tax. But that is a debate now and it has gone to the council of ministers for decision. These are my personal thought and I believe if the industry has to be encouraged, if the consumer has to benefit to buy a house, somehow the cost has to be brought down for the consumer. We as developers have done our bit, we are working on very thin margins and at times single digit margins. I do not think we can do anything more than what we have done. Somehow the cascading effect of taxes have to be controlled and if that is done, the consumer will be the beneficiary and will be able to realise their dream of buying a house.
On Rs. 2000 cr target of rental income by 2020: Yes, we will exceed that because that is where now we have really scaled up. We have got three developments which are under construction in the IT space in Bangalore and Pune where we are going to start work very soon. In Ahmadabad at GIFT City, our building is getting ready. Now with all this coming up and the current rentals and the general market rental itself, rates have gone up and the vacancies are near zero, we will actually exceed that target and we are pretty bullish about it. We have something like about six million square feet under production and all this will add up to the kitty. Apart from that, on the retail side, we have opened the Prestige Shanti Niketan forum a couple of months ago. That is also trading well. We are just waiting for the last bit of licenses like cinema etc which would be trading this month and even on the retail portfolio which is growing, we have got two, three more assets which are under construction which should be ready by 2020. Even that will add up to the rental portfolio of the company.
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