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After giving Mumbai its share of landmark buildings, such as Taj Mahal Hotel, Oberoi Hotel, Reserve Bank of India and World Trade Center, what is the next marquee building that we can expect from the 147-year-old Shapoorji Pallonji group?
“Wait and watch,” says SP Real Estate’s mild-mannered CEO, Kekoo Colah, with a laugh, before discussing the company’s future plans. Excerpts from an interview:
What are your ambitions for the company?
There has been a fair degree of trust deficit between what the real estate fraternity has offered and what it has actually developed.
So first and foremost we would like to be a developer of choice known for its brand equity, track record and uncompromising quality.
What is your present portfolio like?
Our portfolio spans into pan India projects. We have a fairly high concentration of IT in our portfolio in terms of SEZ and IT parks. However, everything new that we have looked at in the last couple of years has been in the residential sector, particularly mid-income group and high-income group housing.
There are good opportunities but we can’t be everywhere at all times so presently our focus will be on metros and major cities such as Bangalore and Pune, rather than Tier 2 and 3 cities.
What are the key challenges that you face as a developer?
One of the key challenges today is the plethora of permissions that we have to encounter. It is complex and there is a lot of overlap. Since we have a pan India presence each local market has its own development control regulations, own municipal byelaws and regulations and it is difficult, tedious and time consuming.
On one end one holds the developer to commit and maintain a delivery schedule but on the other end there is no understanding or sensitivity or recognition of the delays the developer faces. Both ends of the spectrum do recognise that there are too many bottlenecks which need to be freed up because this industry has a gigantic impact on employment and growth.
What is the business model you will be following?
We are looking at multiple opportunities in the residential sector with land owners who want to develop the land but nothing is finalised yet. The model we are following is of joint development.
We are also assessing opportunities where developers who have acquired land approach us to help develop projects as they lack the financial wherewithal for construction.
For us the additional advantage is that construction and so many bits of the value chain are in-house, such as mechanical, electrical plumbing, construction material and façade.
Do you think your affordable housing project in Kolkata will work in other cities as well?
Entering into affordable housing calls for a different mindset, cheap land, quicker approvals and standardised design. It is more of a manufacturing model than a niche design model because you have to have prototypes in place and have technology as an enabler to bring a product to the market as quickly as possible. So we are looking at a different way of looking at this particular market.
Typically, for the larger cities, some of the larger land banks will necessarily be in the suburbs. Here again the role of the government in terms of road and rail connectivity and social infrastructure is important because there is a limit to what an individual developer can do.
Pricing of such projects in other cities will depend on several local market factors such as the FSI (floor space index) available, the price of buying land and the supporting infrastructure.
How are you planning to fund your expansion plans?
For initial capital requirements to enter into joint development agreements we have adequate funds through internal resources. For construction finance we go to several banks for all our projects. Residential is a self-liquidating portfolio. Once you announce the project and get a good response, you get about 15-20 per cent of the value of the stock upfront. We have taken PE (private equity) funding in our past projects and are not averse to it in future. But we are looking at it on a case-to-case basis even though we have PEs approaching us to back our projects. It is an important and valid source of financing for us.
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