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Informist, Wednesday, Oct. 23, 2024

By Rajesh Gajra

MUMBAI – Construction costs, which were relatively low in the first half of the financial year 2024-25 (Apr-Mar), will accelerate in the second half of FY25 and rise till the middle of FY26, the management of Godrej Properties Ltd. said during a conference call with analysts Wednesday. The management was responding to a question whether there would be a significant rise in construction costs in Oct-Mar since the company's cash collections had gone up considerably, but construction outflow had not increased as much.

The construction costs pertain to projects under execution. The management said the costs do not amount to much in the initial phase of a project as they mostly comprise the cost of excavation and steel rods. The costs rise at the end of the slab-wise phase when the interior work begins. For the projects currently under execution, the construction costs will accelerate from the latter part of FY25 and till the middle of FY26.

Godrej Properties recorded gross operating cash inflow of INR 43.38 billion in Jul-Sept and INR 77.82 billion in Apr-Sept. The cash outflow from construction was INR 11.58 billion in the September quarter and INR 22.78 billion in Apr-Sept. Cash outflow from other project costs was INR 13.46 billion in Jul-Sept and INR 26.83 billion in the first half of the financial year.

Analysts expect the margins to be impacted by the expected sharp rise in construction costs. Asked how much of the company's cash was lying in an escrow account under the Real Estate Regulatory Act, the management said INR 30 bln was currently lying in the RERA account. The rules under the act require builders to keep 70& of the project funds in a separate escrow to prevent misuse or diversion of customers' funds.

The management said keeping money in escrow is a continuous process with funds being accumulated as a project begins and released as the progress nears completion. The INR 30 billion that the company has in the escrow account currently "will get utilised for the construction and get released as and when the OCs (occupation certificates) are received".

Customer collections rose 68% on year to INR 40.05 billion in the September quarter and 62% to INR 70.17 billion in Apr-Sept, data from the company's investor presentation showed. The booking value during the September quarter was up just 3% on year to INR 51.98 billion from the sale of 5.15 million square feet, down 2% on year. In Apr-Sept, bookings amounted to INR 138.35 billion, 90% higher on year, from the sale of 14.14 million sqft, up sharply by 89%.

PRICING

The Godrej Properties management said that so far in FY25 the company has seen strong pricing growth in the Bengaluru market and the National Capital Region comprising Gurugram, Noida, Delhi, Faridabad, and Ghaziabad. Pricing in the Mumbai Metropolitan Region appeared to see an uptick, it said, but the Pune market had yet to see any favourable pricing move.

Asked if the company is looking to expand into group housing projects in newer cities, the management said its current goal is to "expand within the cities we are already in". In group housing projects, the company is present in Mumbai, the National Capital Region, Bengaluru, and Pune, but was looking to "opportunistically add projects in Ahmedabad and Hyderabad".

"Earlier this week, we added a project for the first time in many years in Ahmedabad," the management said. "In Q4 (Jan-Mar), we entered the Hyderabad market where we bought two pieces of land." The management added that it hopes to launch both these projects by the end of FY25. It also said the company has so far made land payments of INR 25-30 billion to launch projects, including the one in Ashok Vihar, Delhi.

Shares of Godrej Properties ended Wednesday 2% higher at INR 2,964.30 on the National Stock Exchange.  End

Edited by Rajeev Pai

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