Recovery in full earnest in the real estate sector, says Pirojsha Godrej

India's real estate sector is witnessing good growth after a two-year slump, and the recovery will continue for some time, Pirojsha Godrej, Executive Chairman, Godrej Properties, said in an exclusive interview.

Mumbai-based Godrej Properties Ltd (GPL), which is part of the business conglomerate Godrej group, focuses on four key markets -- Mumbai Metropolitan Region (MMR), Delhi-NCR, Bengaluru, and Pune. All four cities are seeing strong growth, especially the Delhi-NCR market has been "really doing well, both from a volume and pricing perspective," Godrej said in an exclusive conversation with Udayan Mukherjee, global business editor, Business Today TV.  

Talking about pricing movements in the key markets, Godrej said, it is so far a volume-led growth story, particularly in a market like Mumbai, it is more about volume than pricing. “We've seen probably mid to high single-digit pricing increases in Mumbai over the last year, which more or less is just keeping up with the cost of inflation that is going into projects. In Delhi- NCR, one can see pricing movement as well. But I do think that all markets across the country will see a significant pricing momentum over the next few years,” he noted. 

On being asked about the impact of inflation on the real estate business, Godrej said, “if you're looking at the very near term of reported earnings over the next couple of years, there is going to be a margin hit because of commodity prices inflation.”

According to a study by property consultant Anarock, housing sales are likely to hit an all-time high this year at 3.6 lakh units in seven major cities on the back of strong demand across all price categories. This is despite the hardening of interest rates on home loans and increasing property prices.

Godrej is of the view that the real estate sector is well-placed to absorb rising rates as well. “If you look at the mortgage rates, they are around 8 per cent. Where we are today is actually one of the lowest, we've seen in the country's history. We, of course, went even lower as a response to the pandemic and had exceptionally attractive interest rates and affordability for that first year and a half. But my sense is even today, if you look at interest rates, they are significantly below previous times, where we have seen the market. In both, 2004-2005 and 2011-2012, which were big boom years for the sector, we had interest rates of about 11 per cent. So, we still have a significant reduction over those levels. All of that means that affordability today remains quite strong,” he said.

Revealing big plans for the Godrej Capital, the executive chairman said, the company has crossed about 3,000 crores in assets under management. It is inherently a type of business that does require capital on an ongoing basis. “So, the thinking is that the group will provide that capital for the first four or five years as the business establishes itself and, perhaps look to be listed if metrics make sense at that time.”

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