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Shriram Properties will continue to focus on residential development in South India instead of aiming to be a pan-India player. So far the company delivered over 12 million sq ft of built up space across residential, commercial and office space. M Murali, Managing Director, Shriram Properties tells T E Narasimhan the company is waiting for government to announce incentives before entering the affordable housing segment. Edited excerpts:
How was 2014 and what are your expectations from 2015?
2014 was a great year since it brought stability, confidence and hope through a new government. Reform measures like Companies Act, GST, Amendment in land acquisition all have sent positive signs to investors.
Now that the election fever is over and with no state elections coming up, we expect 2015 to be more action oriented. It will be the same for Shriram Properties too.
Real estate Bill is yet to become reality. Do you expect it in upcoming budget?
Yes we hope it will be part of the Budget. The Bill will address major issues like GST, reduction in the tax components (today 42% of the money spent by a customer to buy a house is going towards various taxes) and some measures towards stamp duty and guideline value. We also expect some tax benefits to boost affordable housing projects in the country.
How do you see Amendments in Land Acquisition Act?
It is a welcome step and this underscores the government's commitment to reforms. This will be another big-bang reform similar to GST that will accelerate private investment cycle.
Amendments to the Land Acquisition Act -exempting from both the consent clause and the social impact assessment for the specific five purposes, i.e. infrastructure projects, affordable housing, industrial corridors, defence purposes, and rural infrastructure - is a positive step and boost to the economic growth of the country.
However, there seems to be no change pertaining to land acquisition for private projects including industries. If this is also addressed, it will be all the more good. This act combined with incentives for affordable housing projects will go a long way in combating the housing shortage in India.
But the government needs to convince the Opposition that any dilution of the provisions of the Act would not in any way affect the interest of the farmers.
What are the future plans for Shriram Properties?
We will close 2014-15 with 30-32 lakh sq ft as compared to 23 lakh sq ft in 2013-14. Target for 2015-16 is to add 40 lakh sq ft, but we may go beyond 50 lakh sq ft. We want to scale up the company's valuation to Rs 20,000 crore from the present Rs 3,500 crore.
Your focus has been on mid-size projects, any plans to enter the affordable space?
At present the company is focussed on the mid-size market (Rs 30 lakh to Rs 1 crore) and 15% of the company's projects are in the luxury space.
Why are you focussed on the mid-market segment only?
Demand in the mid-market segment is huge, not as big as in the affordable housing segment but not as bad as the luxury segment. Margins too are reasonable and there is decent money to be made and huge demand to be served.
Any plans to enter affordable housing space, other parts of the country?
We have identified some land parcels to promote affordable housing projects. We will wait for government's announcements and based on that we will take a final call. We are considering Mumbai, we are studying the region.
What are your investment plans?
For the ongoing projects, it is almost done. Investment will be more towards working capital to the tune of Rs 100-200 crore. By 2015-16, we will acquire land parcels worth Rs 600-800 crore across South India. At present the company has got a land bank of 1,200 acres across South India and Kolkata.
How will you fund the projects?
Shriram Properties is a debt free company. Besides PE funds are chasing us and we have potential to raise Rs 2,000 crore. The company is also sitting on cash.
