Unitech MD, Sanjay Chandra sees office rental growing by 30-40 per cent over 7-8 months. Residential prices in tier-I cities have gone up by 15-20 per cent. He sees FY08 revenues at Rs 3,000 crore. Unitech's land bank is at 14,000 acres.
Excerpts from the exclusive interview with Sanjay Chandra:
Q: The biggest query on everyone’s mind is how pricing is panning out both in terms of Tier I and Tier II cities. Can you give us a sense on what is happening on that front?
A: I think for most of the Tier I cities are still seeing a healthy growth in pricing, it depends on the asset class and the location. We see office rentals across the board, office as well as commercial retail properties climbing very steadily. Residential is also growing but not as much as the offices. We have seen office rentals go up 30-40% over the last 7-8 months.
So we do see healthy growth in the Tier I cities where there is employment generation. Tier II cities again broadly speaking is tough to generalise but it depends on which markets. If you are in the Tier II cities, where new employment is being created and a good social infrastructure is there, housing demand is growing in those cities but there are certain markets which had grown much faster than the real demand or the employment creation in those markets.
So, it will be tough to say which Tier II cities are growing and which are not but some of them are growing faster, some of them are not growing too much.
Q: Coming to your company in particular you have a whole host of growth projects, green-field and brown-field airport projects hospitality business. Can you give us an idea whether all these will come under the Unitech banner the listed entity? And secondly what will that been in terms of growth. You had a mind boggling growth rate in the first quarter Rs 185 jump in revenues, can one continue to expect this kind of growth considering the projects you are into?
A: Our business is such that there would be growth but quarter-on-quarter is something, which is very tough to really work out since in our industry you would grow in periods of couple of years actually. So we do see a lot of forcible growth in our business in terms of other asset categories, which we have started. Our hotel rollout process is under way and our hotel assets are well in progress on construction. All those would start generating income only starting in 2008.
So we will see new streams of incomes but more than incomes what we will see is asset creation happening, which we will encash but at what time we are not very sure.
So that’s why in our business you will see some lumpy quarters or lumpy years. And everything, which we do as a group within real estate, is within Unitech Limited then listed company banner.
So as the promoters in this company do not own any other real estate asset, so everything will happen within this company itself.
Q: Can you give us a sense of how residential prices have moved both in Tier I and Tier II cities and what sort of an outlook do you have on that and are both these residential and commercial rates that you were talking about sustainable over the medium-term?
A: Residential prices in Tier I cities in prime locations have gone up about 15-20% since the beginning of the year and now. But in the suburban markets it is dependent on whether that suburb did have employment creation so anywhere from being flat to 15% appreciation is what we have seen in these markets.
In terms of sustainability, I feel as long as the Indian economy is growing, so as income levels are rising lot of the incremental money is coming into housing, the aspiration levels of the customers are rising.
So we do see it to be sustainable if Indian economy will grow at even 8% a year.
Q: I accept the fact that your growth will be lumpy and it will always be difficult to make a quarter on quarter performance. But going by your first quarter performance, is it legitimate to expect Rs 3,000 crore revenue or sales numbers by the end of the year for FY08?
A: We are hoping to achieve that.
Q: Since you are getting into so many different aspects of your business, what is the total capital outlay you have over a 3-5 year horizon at this point of time and are you adequately funded for the same?
A: We are adequately funded for capital outlay. I think between our hotel as well as retail business, we would be spending somewhere close to Rs 7,000-8,000 crore over the next two years. But that would be building assets; it won’t be giving us revenues quite yet.
In terms of residential, which is constantly producing revenues because as we build we sell, we would spending about 15,000 crore over the next three years. We are adequately internally funded as well as our business model is such that we don’t need too much of external capital.
So we have no intensions to raise further capital from the markets.
Q: As things stand today, what is your total stated land bank?
A: Total stated land bank was about 14,000 odd acres, where the economic interest to us was about 10,900 acres. This is our disclosed land bank as of September of last year.
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