India’s real estate sector is seeing good growth after a two-year slump, and the recovery will continue for some time, Pirojsha Godrej, chief executive of Godrej Properties, said in an exclusive interview.
Mumbai-based Godrej Properties Ltd (GPL), part of the Godrej Group business conglomerate, focuses on four key markets: Mumbai Metropolitan Region (MMR), Delhi-NCR, Bengaluru and Pune. All four cities are experiencing strong growth, especially the Delhi-NCR market has been “really doing well, both from a volume and pricing perspective,” Godrej said in an exclusive conversation with Udayan Mukherjee, global business editor, Business TodayTV.
Speaking of price movements in key markets, Godrej said, so far it’s a volume-driven growth story, particularly in a market like Mumbai, it’s more about volume than pricing. “We have seen probably mid to high single digit price increases in Mumbai over the last year, which more or less keeps up with the cost of inflation being invested in projects. At Delhi-NCR, you can also see the price movement. But I do think every market in the country is going to see significant price momentum in the next couple of years,” he noted.
When asked about the impact of inflation on the real estate business, Godrej said: “If you are looking at the very short term of reported earnings over the next two years, there will be a margin impact due to property prices. raw Materials. inflation.”
According to a study by property consultancy Anarock, home sales are likely to hit an all-time high this year at 3.6 lakh units in seven major cities due to strong demand across all price categories. This is despite tightening interest rates on home loans and rising property prices.
Godrej believes that the real estate sector is well placed to absorb rate hikes as well. “If you look at mortgage rates, they are around 8 percent. Where we are today is actually one of the lowest we’ve seen in the country’s history. We, of course, went even lower in response to the pandemic and had exceptionally attractive interest rates and affordability for that first year and a half. But my feeling is that even today, if you look at interest rates, they’re significantly below prior times, where we’ve seen the market. In both 2004-2005 and 2011-2012, which were boom years for the sector, we had interest rates of around 11 percent. So we still have a significant reduction above those levels. All of that means affordability today is still pretty strong,” he said.
Revealing big plans for Godrej Capital, the chief executive said, the company has surpassed Rs 3 billion in assets under management. It is inherently a type of business that requires capital on an ongoing basis. “So the idea is that the group will provide that capital for the first four or five years as the business gets established and maybe look at listing if the metrics make sense at that point.”