We work in a few mkts, don't spread ourselves thin: Mahindra Lifespaces CEO

In a Q&A, Arvind Subramanian says his firm hopes to achieve Rs 2,500 crore residential sales a year and industrial leasing of Rs 500 crore by 2025

Aiming to achieve Rs 2,500 crore residential sales a year and industrial leasing of Rs 500 crore by 2025, Mahindra Lifespaces is eyeing the affordable housing sector in Mumbai, Pune, and Chennai, said Arvind Subramanian, Managing Director & CEO, Mahindra Lifespaces Developers Limited in an interview with Pratigya Yadav, following the company's announcement of its September quarter results. Edited excerpts:

Were there any specific reasons for the company’s loss in the second quarter?

The loss is attributable to fewer project completions. In real estate, accounting only recognises revenue when the project is completed--until then it stays on balance sheets. In the second quarter, we completed very few residential projects. That will be hopefully corrected in the third quarter as we have few completions lined up.

How did the residential market perform in the second quarter?

Typically, the second quarter is a seasonally weak quarter in the Mumbai real estate market due to the monsoon  and shradh etc. Most real estate companies have a slowdown phase in the second quarter. Despite that, we have sales worth Rs 400 crore on the back of one new launch in Pune called Mahindra Nestalgia. We are also seeing a very strong demand across locations. In fact, we have been able to take prices up in all our projects, in some cases by as high as 7-8 per cent. That speaks very well to the depth of the demand in the market.

Are there any expansion plans for your residential market in North India?

As of now, in the residential space, we have decided to focus on Mumbai, Pune and Bengaluru in the next few years. We’ll continue our residential projects in Mahindra World City, Chennai, because we want to be focussed and deep in a few markets rather than spread ourselves across multiple markets. Once we reach a certain scale in these markets, we will certainly be looking at NCR, Hyderabad and several other markets where our interest lies.

What has the growth been like in the affordable and premium segments, in which Mahindra Lifespaces is aggressive?

Both have seen very strong growth. In fact, if I look at the second half of the year, we have some exciting new launches. We are also looking at new phases of our existing project. We launched Happinest in Mahindra world city, Chennai last year. The first phase has launched about 348 apartments. It got fully sold out in just three months. We are launching the second phase of the Happinest project with 348 apartments later in this month.

We also launched the first phase of Mahindra’s Eden in Bengaluru, India’s first net-zero energy project in the first quarter. We are starting the second phase this weekend.

We are also looking at the main launch of Happinest Kalyan project 2.0 at the end of this month.

Are there any specific initiatives taken by the company for sustainable developments and ESG compliance?

We have been green certified since 2014 onwards. We have been one of the few developers who have been ahead in green and sustainability. Mahindra Eden is India's first net zero energy project. By 2030, all of our new projects will be net zero. In fact,  this year we published an integrated sustainability report, a year ahead when SEBI has mandated companies to publish integrated reports.  

How many projects are under construction and what is the inventory status for future launches?

If we look at the launches lined up for the second half of this year, there is a gross development value (GDV) of about Rs 1,200 crore. That’s a healthy number for the trajectory of the company in the industry. Overall, we have around Rs 4,000-5,000 crore of sales. We have a development footprint of about 12.70 mn sq ft across premium and value housing for ongoing and upcoming projects.

Is the real estate sector also feeling the heat of the global flurries, rising interest rates and raw material prices?

Over the past one year, raw material prices have risen sharply. But in the past 4-5 months, they have roughly been flat. Interest rates, however, are going up, so from a customer affordability perspective, there has been a marginal impact with increase in mortgages. But still, the demand is robust especially after the pandemic, and a much stronger demand for good quality homes is coming in.  

Are there any expansion plans for the integrated cities and industrial clusters (IC&IC) segment?

Yes, we are seeing good demand for this segment as well. We have already done around Rs 68 crore of industrial parks leasing in this quarter. Overall, we've done Rs 186 crore of industrial leasing during the year. Last year, we had done industrial leasing of Rs 297 crore. This is at the back of very strong uptake in manufacturing investments post all the various policy initiatives announced by the government, including Production-Linked Incentives (PLI) schemes. State governments have also been very active in moving manufacturing investments. We are seeing a good pipeline into the rest of the year and the next year quarters as well because in the last few years, the manufacturing investments were very muted.