<b>Lunch with BS:</b> Building on brand equity

Pirojsha Godrej explains demonetisation and a new law to increase transparency in real estate sector

After being chased for months, Pirojsha Godrej, chairman of Godrej Properties, and son of Godrej family patriarch Adi Godrej, agrees to have lunch with BS. He prefers to eat at his office in the new Godrej headquarters in Vikhroli in suburban Mumbai.
 
When I tell him that he and Rajiv Singh, vice-chairman of DLF, are among the few in the PR-hungry real estate industry, who shy away from the media, he laughs and says he seldom picks up calls at work. Early this month, Pirojsha was elevated as chairman and his father as chairman emeritus of the company. Mohit Malhotra, executive director, was made chief executive officer and managing director.

 
The anteroom of his office is the venue for our lunch where a nice vegetarian spread has been laid out because I am vegetarian. As I pour myself some hot and sour soup, I begin the conversation with a tricky question: Has the recovery in the real estate sector been delayed by demonetisation? Pirojsha believes otherwise. With reforms like the goods and services tax (GST) kicking in, interest rates on the decline and incomes rising, recovery will start after a brief lull of six to nine months, he says. In fact, initiatives such as demonetisation and the Real Estate (Regulation and Development) Act, 2016, or Rera will increase transparency in the sector and people will get the confidence to buy despite some instances of inordinate delays, cheating and so on. In fact, his own company continues to post good sales numbers despite demonetisation.

 

Just before demonetisation, the company sold Rs 300 crore worth of villas in a single day in Noida, just outside Delhi. In the days following demonetisation, it sold 300 apartments in a Pune project.
 
As we try a preparation of asparagus and water chestnuts in black bean sauce, I ask him whether small and medium developers can handle things such as Rera which is very strict on compliance. Godrej says there are simply too many small developers and some amount of consolidation is good for the industry and that is already happening.
 
He says when he became CEO five years ago, 20 to 30 per cent of the joint development proposals were from other developers and the remaining came from land owners and companies that owned a piece of land. “Today 80 per cent of joint development proposals are from other developers.” I counter him: After demonetisation, which has impacted sales across industries, won’t Rera present another challenge for developers? Will growth not stagnate further, I ask. He agrees but says that a year from now, things will be different. With the media speculating that prices will crash, people are waiting and watching, but will pick up in due course.

 
We move to fried rice and papaya salad. He recalls how the situation was really bad during the global financial crisis of late 2008 but they bounced back in 2010 when his company launched its IPO. “People in this industry believe the current state of things will last forever but I believe they are cyclical. I don’t agree that the industry will remain in a state of slowdown for the next three to four years.”
 
The company’s recent launches in Pune, Thane and the national capital region have done well despite the overall industry slowdown. Is it because of the brand’s equity? Besides a good brand, there is demand for projects by good developers who offer quality and deliver on time. “Whoever is doing that, will find takers.”

 
Godrej Properties posted a fourfold jump in profit in the third quarter of the current financial year, probably the only real estate company that did so well in that quarter. At 36, he must be among the youngest in an industry that is going through so much of pain, constant change in policies and so on, I observe. Most people in his leadership team, including the managing director, are under 40.
 
“The age factor helps given the constant change in policies, the dynamics of the industry and the profile of buyers,” he says. “If you have good training and understanding, age and experience do not matter. Only capabilities matter.”

 
For dessert, we have fresh fruit.
 
Was it difficult to come out of the shadow of his illustrious father? “Not really,” he says, and adds he has a wonderful working relationship with Adi Godrej, who is a source of inspiration for him. “My father guided me and all my siblings and never stopped us from taking decisions for ourselves,” he adds.
 
He says he chose to steer the group’s real estate company as it was not a major priority for the group back then and had a lot of opportunities for growth. “Today we are 100 times of what we were in 2004-05.” He says the landscape of the industry will change completely in the next 10 years and the scale of developers will also change in that time.

 
On a lighter note, he says that since Godrej Properties had an office in south Mumbai in those days, he picked the company after he returned from the US, where he attended college.
 
I ask him why his company is not building more commercial properties and why has the number of joint developments come down in 2016? He says the return from the commercial sector is smaller compared to residential properties but the group would be building a commercial development in Vikhroli where the Godrej group owns thousands of acres. “The idea is to do a portfolio of commercial property like what DLF has done in Gurugram (on the outskirts of Delhi) and monetise part of it,” he says. He rues that joint development is tricky and may not be up to expectation all the time. But the strategy will change this year.

 
Is it better for a real estate company to focus on a single geography or to spread out? He says there is no right answer to that question. “It depends on a company, what its strengths and advanges are. The advantage we enjoy is that we are a strong and nationally known brand and not dependent on political and bureaucratic connections in any geography.”
 
Is that such a great idea? It is possible to sustain the business without political connections?
 
Such connections played a part 10 years ago. “Today, it is much much less,” he says. “We are in many locations and we have seen success in most places. We also understand the advantage of geographic concentration. Having said that, our key focus is to expand in Mumbai, NCR, Bengaluru and Pune.”

 
He is planning to shift from south Mumbai to Vikhroli where the company is building a township, The Trees, which could cut down 45 minutes of his travel time. “It would be a transformational project for the area,” he says. When the township comes up, it would give him more time to be with his children. He became a father for the second time recently.