Bangalore-based developer says tumbling realty prices is not a major cause for worry
BANGALORE: The past few quarters have seen the real-estate sector cool off a bit, but Bangalore-based developer Puravankara Projects Ltd (PPL) is unfazed by the meltdown in property prices.
PPL director Ravi Ramu said since the company has huge land bank within city limits, bought at cheap rate, the tumbling prices is not a great cause for worry.
“We bought our land at very cheap price at the right time and right location. We went to Chennai, Kochi and Hyderabad when no one else was going there,” Ramu said.
Puravankara owns one of the cheapest land banks among the developers in south India at Rs 97 per sq ft. This is Rs 155 per sq ft (159%) cheaper than DLF’s land, which was bought at Rs 252 per sq ft.
One of its closest rivals in Bangalore - Sobha - owns its land at Rs 221 per sq ft, which is Rs 124 per sq ft costlier than Puravankara’s.
The land owned by other real-estate majors like Unitech, Parsvnath, HDIL and Omaxe are also more expensive than PPL at Rs 169, Rs 256, Rs 127 and Rs 146 per sq ft, respectively.
Such land cost competitiveness, analysts believe, will ensure high margins for the developers even as the sector experiences a downturn.
Another reason analysts are betting high on PPL is because it has very small outstanding on land payment, which is barely Rs 86.4 crore (8.3%) of the total land cost of Rs 1036 crore.
DLF’s outstanding on land payment is Rs 5,700 crore (36.96%) against a total land cost of Rs 15,420.2 crore. Sobha has an outstanding of Rs 1,170.8 crore (38.67%) against a total land cost of Rs 3,026.9 crore.
Ramu says that most of Puravankara’s projects have had advanced sales of around 50% and since its projects are located in areas, which have not yet saturated, their prices continue to rise even today.
“Just a fortnight back, we increased the prices of apartments in our project near the Bengaluru International Airport by around 18-20%,” Ramu said.
Jamal Ahmed, a Bangalore-based property broker, confirmed this: “Devanahalli (area where Bengaluru International Airport is being built) is seeing some activity. Reports of the new airport have pushed up prices in that area,” he said.
And PPL would not be looking at expanding its presence beyond south India.
“We are not looking at a pan-India presence. In the West (US and Europe), no real estate company operates across the country, they are localised. Likewise, we would also like to concentrate on the Southern market,” said Ramu.
Going forward, the developer is also planning to increase the proportion of commercial projects from the current 4-5% to 25%.
This is being viewed positively by analysts. Puneet Jain and Sandeep Reddy of Kotak Institutional Equities Research note in their report on March 3 that PPL’s built-up land bank of 33 million sq ft commercial leasable area will be fully leased by 2016.
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