Thursday, February 24, 2011

Realty Check : How Are Experts Reading the Space? Mr. R.Vasudevan Expresses Views On Current Real Estate Trends

The country is currently reeling with high realty rates. But, if brokers and analysts are to be believed, these prices are set to correct to the tune of 10-20% soon.

There has been a lot of distress in the space with debt mounting, interest rates rising and sales not quite happening. Also, there have been numerous talks on the demand-supply imbalance in the sector, but Mr. R. Vasudevan, MD of Vascon Engineers denied saying, 

"We don't see that scenario hitting us at least; we have been busy with executing the orders for which bookings have been done."

Seeing an upsurge in demand for commercial property in Bangalore, Venkat Narayana CFO of Prestige Estates said, "There are a lot of enquiries. We have leased quite a bit of the space this fiscal already."

Below is the verbatim transcript of these experts' interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal.

Q: How is the situation in the ground looking like, is it a situation where builders are trying to hold out but buyers are not biting?

Vasudevan: I don’t think that’s the situation across. It may be in certain locations where there is huge supply. There is a backlog in terms of supply because there are good amount of orders which had come in and those are under construction now. We are really busy in terms of executing the orders, the bookings which we have done. I don’t see that scenario at least hitting us in any of those locations where we are.

Q: Do you expect that prices will hold up at current levels, are most of your projects in Pune?

Vasudevan: Yes, our average base for most of the projects is around Rs 3,500 to Rs 4,000, except for one or two projects. These levels are bare minimum levels. In between, the prices got corrected a little rapidly but now they have stabilized and they will hold on.

Q: Can you take us through the price trend in all the major cities that you have worked in, Pune, Nashik and Nagpur?

Vasudevan: In all these cities 80-90% of our product are in the maximum range of about Rs 3,000 to Rs 4,000-4,500.

Q: You have quite a bit of exposure to Bangalore, infact almost 80%, what’s been the trend in the Bangalore market in terms of commercial real estate because it is ofcourse the hub of IT and ITES?

Narayana: Commercial real estate has been doing well this fiscal. The demand has picked up, there are a lot of enquiries for large amount of space. We have leased quite a bit of the space in this fiscal already.Going forward, we see lot more demand for the commercial segment.

Q: What is the kind of debt situation that your company faces, how much would you have to either redeem or rollover before the year is out? I meant calendar 2011?

Narayana: The debt repayment for 2011 is as low as around Rs 70 crore as there are 40-45 days to go. If you look at the calendar year 2011, our debt repayment is around Rs 200-250 crore. For FY12, our total repayment is around Rs 350 crore.

We have been saying that we are focused on the rental module. Because we have high rental yielding assets there is bound to be some amount of debt. Its not a project level debt. We are in very comfortable situation.

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