Real Estate’s Residential segment is on a multi-year bull run: Varun Gupta, Whole Time Director, Ashiana Housing Ltd.

Varun Gupta, Whole Time Director, Ashiana Housing Ltd., talks about his outlook for the year 2022, project pipeline, geographical presence, price hike plans, focus areas, acquisition of the land parcels, performance expectations in FY23 and profitability among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: How the year 2022 is looking in terms of demand trends and do you think that the year will be better than the last year?

A: I think, 2022 will be better than 2021. The real estate sector particularly the residential sector in real estate, the segment that we participate in, is in a multi-year bull run phase and this is a beginning. So, I feel, every year will be better than the previous year for the next three to four years.

Q: Good growth has been seen in the residential segment, but the commercial segment is muted yet. How the year 2022 is likely to be for these two verticals?

A: I will not be able to make a lot of comments on commercials because we are not into commercials and are not aware of it. But for the residential segment, 2022 will be good and I think the salary growth is likely to be good in April with general businesses doing well. So, this can provide an upside to improve the affordability and the interest rates are low yet and I feel it will continue for some time. At the same time, there is a pent-up demand as the sector has gone through a very difficult time for the last five to six years. So, overall, 2022 is looking good for the sector and the growth that was seen in pockets will turn more secular. Thus, the number of pockets will keep increasing as we move further.

Q: What are the plans of your company for 2022 in terms of the project pipeline, land acquisition, geography that will be added to increase your presence?

A: We have bought a lot of land in 2021 and have made a lot of big transactions. We have taken a project in Gurugram, two projects in Pune that will be launched, two projects are present in Chennai, one project each in Jamshedpur and Jaipur. We also have a senior living project in Bhiwadi. We have eight projects in the pipeline already which are 12 months away from launch. So, 2022 is a very important year for us so that we can take approvals and launch the projects successfully. These projects are in new markets, at a bigger price point and are of bigger sizes. So, this year is a very important year for us in which we are supposed to make very good launches successfully.

Q: How many launches should we expect this year and what would be the locations? Also, how the current orderbook is looking and what is the debt situation of the company? 

A: We should launch six to eight projects in the next financial year (FY23) of which two in Pune, and one each in Bhiwadi, Gurugram, Jamshedpur, Jaipur and Chennai. So, that is the pipeline for launch. Our orderbook is good as sales is good in the projects that are running, and we can’t see any issues in those. On a net debt basis if I exclude unsecured long-term financing then on the net-debt basis we are a net positive cash company, and our balance sheet is good and healthy.

Q: The raw material costs have increased. So, will this translate into price hikes, if yes, what will be the quantum and what are the timelines for it?

A: We have increased the sales prices in the last two quarters, and I think the sales price increase will be more than the input cost given the lack of supply in the real estate sector in general. I feel, there will be a secular price increase of around 1-1.25% in every quarter and if not more than something that I would look at is an increase of 5-6% price increase in a year, if not 7-8%.

Q: You have a special focus on certain things namely senior living, kids’ centric homes, comfort homes. Is there any other segment where you would like to increase your presence, if yes, what is going to be your strategy on that front? 

A: Strategically, at present, we want to increase the senior living segment as I believe that senior living is at an inflexion point in India where the demand for senior living will increase. Accordingly, we have started a senior living project in Pune, which is located between Bombay and Pune. One of our senior living projects was going on in Chennai and we have started two more projects there. We will also launch a senior living project in Bhiwadi. So, the company will continue to have its focus on senior living projects. Secondly, in the Kids’ Centric Homes, we have taken a larger project in Gurugram where we are incorporating our learnings of the previous three projects to design a new type of Kids’ Centric Homes. So, we will also have our focus on proper implementation of the project and if that goes well then look for more Kids’ Centric homes and that kind of design as well.

Q: You have talked about the acquisitions of land parcels, last year. Will the trend continue further as there can be pent-up demand in near future and what is your strategy, or do you think your hands are full?

A: We are looking to acquire two to three more land parcels beyond that the hands are full. We have already acquired six land parcels in the last nine months, so, that pace will slow down. But it is not so that we will not acquire anything. We will slow down the pace, launch a few projects, make them successful and then look forward to land acquisitions. Currently, we will acquire just two to three land parcels.

Q: Where are you looking forward to these two to three land parcels?

A: Primarily, we are looking for new land parcels in Jaipur and Jamshedpur.

Q: On the front of the company’s performance. What kind of performance you are expecting in the next financial year, i.e., in FY23, and what kind of growth viz-a-viz last year we can expect in terms of the top line, bottom line and margins?

A: I would not like to provide exact guidance but our company on a reported basis, till date, was in losses this year because our deliveries were quite weak this year. But the next year is big for deliveries. So, we will move into a substantial profit and will start making good profits. Area book, the product that we are selling - maybe its revenue recognition will happen after two to three years – we would like a significant growth in that next year because the launches are approaching. I would not like to quantify this significant, but we have plans to shift the company’s gear, i.e. if we make launches next year then we may move in a different zone from the kind of scale we have.

Q: You have talked about profitability. Can we be able to see profits in the last quarter of this financial year (Q4FY22)? 

A: No, as we don’t have deliveries in this quarter, which will start in the April-May-June quarter.

Q: You have a major focus on middle-income and affordable segments. We have seen that during the COVID and post-COVID that the ticket sizes have moved towards Rs 40 lakh onwards houses. Is that segment attractive for you and what has been your observations? Also, would you like to move beyond your category, if yes, what is your strategy for it?

A: Actually, we don’t do affordable houses and I think people in Bombay and Delhi think that Rs 40-50 lakhs is affordable then we fall under affordable. In whichever market we are in, we are a premium builder cum developer and today our average ticket size is just above Rs 50 lakhs, and our average ongoing ticket size is around Rs 51-52 lakhs and that is doing well. Most of our products are in the Rs 40-80- lakh bracket. So, we are in that space and the space is seeing healthy demand.

Q: The budget is around the corner. What are your expectations from the budget?

A: We don’t have any specific sectoral expectation as long as the budget continues to the way they have been doing in the last few years, the economy grows we will be very happy.