We see growth fuelled by all our business domains: Brigade Group MD

Bengaluru-based real estate developer Brigade Enterprises recently elevated Pavitra Shankar, executive director of the company, and daughter of chairman M R Jaishankar, as the company’s managing director (MD), and Nirupa Shankar as joint MD as part of the succession plan. In conversation with Raghavendra Kamath, Pavitra talks about the company’s plans and her outlook for the sector. Edited excerpts:

Do you expect headwinds in home sales in 2023 as rates rise?

We closely monitor home loan interest rates. We did not see rates impact demand negatively, even when they were beyond 9 per cent before the pandemic. This is due to affordability having increased for our target demographic and an upswing in the residential real estate market cycle.

Before there is any bearing on overall demand, I believe the inventory preferences will first change to more compact unit sizes than what are currently fancied.

We observe around 55-60 per cent of our buyers financing their real estate purchases via home loans. A home loan tenure is generally for 15 years and more on a floating rate of interest. The increase in rates is usually passed on as an increase in the duration of loan and not as equated monthly instalments.

This tends to have a less significant effect on demand. The home loan tenure is seven to eight years (as historically observed) since customer behaviour prescribes repaying the loan with increase in wage and progression in career.

What kind of impact do you see from the information technology (IT) slowdown on office leasing?
 

If there is an IT slowdown, we see demand consolidating with branded, listed players like ours as a flight to quality. This applies to residential or office segments. The best approach is to ensure we are putting out the right product in the right submarket with a focus on customer experience, and remaining the first choice of any potential buyer or tenant.

Where do you want to see the company by 2024-25?

We see growth fuelled by all our business domains. Residential sales will continue to be robust, supported by our pipeline of forthcoming launches and land banks with a three- to five-year monetisable pipeline.

Our commercial capital expenditure will have completed and we should be seeing cash flows from an operating office portfolio of over 10 million square feet (msf).

Hospitality wears a bright outlook after the pandemic. Our hotels are already doing very well in terms of occupancy and the average room rate.

Do you plan to branch out to other cities like the way Prestige Estates has?

We believe the opportunities from the strong and stable South India markets of Bengaluru, Chennai, and Hyderabad as being for all our business domains. Our land bank is now 25 per cent in Chennai. We are actively engaging in Hyderabad. We have also been present in smaller markets like Mysuru and will evaluate others for future potential. We do not intend to branch out to the Mumbai Metropolitan Region, the National Capital Region or Pune in the next three to five years.

How do you look at recession predictions next year on the real estate market in general and companies in particular?

Recession in the US and some western economies is a foregone conclusion. India is a bright spot relative to others in the world and should attract global businesses seeking growth elsewhere from their home markets.

This should at least allow our economy to continue at a reasonable gross domestic product growth rate that is sufficient to sustain the observed momentum in real estate.

Companies like ours that are built on tangible assets and visible cash flows should get better valuations.

Will the company tweak apartment sizes and ticket prices if a slowdown happens?

As we do in any market cycle, we closely monitor affordability and market conditions to keep our product in line with customer preferences. While it depends on market acceptance, pricing is also something we can drive to an extent, given our brand strength and consistent focus on lifecycle realisation in the project.

What are your launch plans for the remainder of 2022-23 (FY23)?

We have already launched 2 msf in FY23. In the next two quarters, we should launch 6 msf of residential, including plotted developments in Bengaluru and Mysuru. We are also working on 2 msf of commercial space launches in the next two to four quarters.

The company posted a profit of Rs 52 crore during the second quarter (Q2) of FY23, compared to a loss of Rs 14 crore in Q2 of 2021-22. How did you manage this?

The overall business sentiment improved over the past four quarters and all verticals performed well, especially the hotel leasing segment. The total increase in revenue from this segment is Rs 103 crore, thereby improving profit after tax.