HOW WAS THE YEAR 2022 FOR THE RESIDENTIAL SECTOR?
2022 was a strong year for the sector, especially for branded and trusted developers. The consolidation theme played out, as was envisaged by us and many other leading players. Most cities witnessed significant residential real estate sales, one of the highest year-on-year jumps in the last decade, despite interest rate movements.
In fact, listed developers registered a 20% to 120% growth in the first six months of the financial year as compared to last year. Consolidation and formalization of the sector continue to play out with organized players especially the listed and leading ones consistently gaining market share. We believe developers with strong balance sheet will thrive and continue to grow larger.
This year, launches made a comeback in a big way, with several developers successfully launching fresh inventory, enabling greater choice for customers. Many developers have experienced record sales in Q2 and Q3 of this financial year. This demonstrates the market's strength, depth & demand for residential properties. Let me highlight a couple of our successful launches as well.
We launched ‘Arvind Fruits Of Life’ - a plotted development project in Ahmedabad, where we completely sold out the project in just 36 hours. In Bengaluru, we launched another plotted development project – ‘Arvind Greatlands’, and it sold out in just 10 hours. The customer’s readiness to transact quickly is a testament not only to the strength, depth & demand for smartly designed residential properties but also to the brand’s strength and track record.
PLEASE SHARE YOUR VIEWS ON THE PARTNERSHIP WITH HDFC CAPITAL ADVISORS?
We are excited about the way our strategic relationship with HDFC Capital Advisors has consistently progressed over the years. The recent Rs. 900 crore platform was signed in Aug 2022. When we signed the deal we had indicated that we would have to deploy the funds in a 12 to 18 month period across 5 to 6 projects. And these projects are expected to generate an indicative top line of Rs.4000 to Rs. 5000 Cr As of today, we have already made investments in 2 projects – one each in Ahmedabad and Bengaluru. We are now in the course of adding more projects under this platform in the next few months.
It is important to understand that apart from the precious patient capital, HDFC brought in extensive experience in residential real estate. The platform structure not only helps eliminate bottlenecks in capitalization at the company level, but also has enough flexibility inbuilt to ensure that long-term patient capital is made available to the business while efficiently optimizing the balance sheet risk. The partnership leverages our efforts to take on bigger scale projects. The sizeable funds being invested by this platform have brought in an orbital change in the scale of operations and the new project pipeline of the company.
IN WHAT WAY THE COMPANY HAS PLANNED ITS LOANS AND DEBTS STRUCTURING?
Throughout the pandemic, we have governed our balance sheet judiciously, and we entered the post-pandemic growth phase with almost no debt. This gives us significant headroom to grow by leveraging our balance sheet. Additionally, the platform developed with HDFC give us another Rs. 900 cr cr investment arsenal. Also, we expect significant internal accruals given the surplus cash flows we expect from the execution of our existing portfolio of projects.
WHAT ARE THE COMPANY’S EXPANSION PLANS ACROSS CITIES?
We have very ambitious growth plans for our three core micro markets; Ahmedabad, Bengaluru and Pune. We are also looking to expand our footprint in Mumbai Metropolitan Region (MMR) as well. We are planning multiple announcements regarding new project acquisitions in our core micro-markets across both horizontal and vertical development over the next three to four months.
We will continue to augment our market share and leadership in Ahmedabad. We continue to deepen our market share in Bengaluru. Bengaluru is our second home, where Arvind Group has significant operations and human capital. Over the years, Arvind SmartSpaces has leveraged the group’s brand equity in Bengaluru and has built a meaningful presence there.
We already have a project running in Pune, and the Arvind brand has a significant mindshare in Mumbai as well. We have done our studies and analysis in some of the micro markets. We found that Arvind can resonate in a very significant way, the way it happened in the case of Bengaluru. Before we enter into any market, we want to make sure that we are deep enough in the previous ones, and the third or the fourth one should be deep enough for us to have that setup, which can take care of volumes that are appropriate for us given our size.
We believe the current upcycle in the housing market is likely to remain intact and we see several factors contributing to this. Demand continues to benefit from lifestyle changes, where consumers are looking to shift projects with contemporary amenities, upgradation to large homes, and increased adoption of hybrid work models - WFH or Work from Anywhere.
Housing prices have increased across cities and absorbed well by consumers so far. The salaried class and end users are driving demand in the mid-income segment. The luxury market also continues to do well and history tells us that luxury real estate generally picks up in an upcycle.
HOW HAVE YOU ENVISAGED THE COMPANY’S STRATEGIC GROWTH FOR THE NEXT YEAR?
We have been growing at a very strong rate in the past five to six years and we will continue to maintain strong growth across operational and financial parameters. We are planning to launch several projects in Ahmedabad and Bengaluru next year. Plans are already underway to add a few more projects in Pune as well.
Consolidation and formalization of the sector continue to play out with organized players especially the listed and leading ones consistently gaining market share. We believe trusted developers with strong balance sheet shall thrive and continue to grow larger. Beyond next year, slighter a longer-term perspective, we aim to be amongst India’s top ten real estate players. We have the right combination of a balance sheet, brand, geographical presence, product mix, capital allocation strategies, management team, operational excellence, and digital capabilities to successfully achieve this milestone.
WE HAVE THE NECESSARY CAPITAL AVAILABLE TO PROPEL THE COMPANY TO ITS NEXT STAGE OF GROWTH. MEANWHILE, WE WILL CONTINUE TO BE FISCALLY PRUDENT AS A COMPANY AND WILL NOT EXCEED A DEBT-TO-EQUITY RATIO OF 1:1.
IMPROVED AFFORDABILITY ACROSS CITIES ON ACCOUNT OF SUBDUED PRICES AND DECADAL LOW-INTEREST RATES HAS BEEN DRIVING HOUSING DEMAND IN THE PAST FEW YEARS. HOWEVER, INTEREST RATES HAVE BEEN MOVING NORTHWARDS SUCCESSIVELY IN THE LAST FEW MONTHS. WHILE INTEREST RATE HIKES HAVE NOT IMPACTED DEMAND SIGNIFICANTLY, WE REMAIN WATCHFUL.