If you want to buy luxury, you have to pay the price

Kamal Khetan, Chairman & Managing Director, Sunteck RealtyChange can be exciting! Just consider the case of Sunteck Realty, who began in 2000 by managing corporate business centres; the aim was to create brand awareness and a portfolio of blue-chip clients. However, having realised that the valuation and profits of this business came nowhere close to the real-estate business, the company began to look at development. It got its first break in 2005 – a landowner approached it to partner with a developer for a rental generating commercial building at Vile Parle in Mumbai. The company bagged the project, and there has been no looking back since. Kamal Khetan, Chairman & Managing Director, Sunteck Realty, chats with Shanti Padukone about the company’s growth strategies and his latest project in the maximum city of Mumbai.Having just launched your first project, how would you describe your experience in the real-estate industry till now?Indian real estate started booming in 2002-2003, when sums of money started pouring in, and mill land in Mumbai began getting developed. By 2004, this started gaining momentum and the opening up of FDI merely augmented the situation. Armed with a reasonable brand name that worked in our favour to generate cash flows, in 2006, we bid for our super luxury residential project in BKC, Signature Island, taking a contrarian call; the rest, as they say, is history. I think we timed the market well. In fact, in 2005-2007, we were able to acquire three to four good properties with private equity funding and fortunately did not take any wrong decisions in 2007-2008. That was when we set up a JV with the Ajay Piramal Group for real-estate development and Kotak Bank for an investment of Rs 140 crore, and set up a Qualified Institutional Placement in 2009. As a result, we got a commitment of almost Rs 500 crore, which we utilised in 2009-2010 to virtually create our entire portfolio.How has your JV with Piramal Group added to your project portfolio?In 2006, Piramal Group invested in our company through its fund India Reit, and in 2007 we set up a JV with the core group, Piramal Sunteck Realty Pvt Ltd. The philosophy was to leverage the strength of combined brand power and execution capabilities. The company is financially a powerhouse and has done some of the best projects in Mumbai, such as Peninsula Corporate Park and Crossroads. So it had the expertise as well as financing. In the past three years, we have acquired about 14 projects together out of the total 27 in hand.So, is the focus only on Mumbai?Pretty much. Sunteck Realty is a Mumbai-centric company, focusing on the Mumbai Metropolitan Region. We have limited exposure outside in terms of cashing in on our brand and strictly focus on joint development in such a case. In terms of capital deployment, we have been very cautious about not investing outside as of now. We feel that the Mumbai industry is still a regional and local play, and not every developer has been successful. And, as a young company, we want to learn from others’ mistakes.Bandra Kurla Complex seems to be your hub, especially with your latest project. Why BKC?The basic theme for developing Signature Island here was that in any CBD across the world, whether it is Manhattan, Singapore, Hong Kong or even Nariman Point, if there is limited residential supply, and that too in the premium segment, it always has good demand and commands maximum premium. Moreover, with commercial spaces shifting from South Bombay to BKC, we felt that even residential spaces would soon make that transition. And of course, BKC is the only slum-free and hawker-free zone in Mumbai.You have already sold 50 per cent of the 70 units that form Signature Island. Did you anticipate such a high demand for this segment of flats?Signature Island falls under the super luxury segment. People in Mumbai are ready to spend more than Rs 30,000-40,000 per sq ft for a home today. So this is not a unique trend; if you want to buy luxury, you have to pay the price. At Signature Island, we are offering just 70 units. While selling such premium flats was not such an issue, selling the idea of BKC as a residential hub was certainly a challenge. But, with the growing infrastructure, people realised that it will not only be commercial but will include lifestyle services and hospitality. And, our 50 per cent sold status signifies their belief in us.What was your sale strategy?We have sold the initial 35 apartments to the best names in the industry through personal invitations and only after complete, thorough diligence. We mainly operate through word of mouth. We have never published advertisements or circulated any marketing material; we don’t even have a brochure. Such a strategy takes care of execution risk. Because, when you try to sell such a vision, people become sceptical about whether it can be delivered.What technologies are you currently using in construction?Given the nature of Signature Island, it became rather difficult to experiment with technologies, especially with it being our first project. But, with Island Pearl and Sunteck City, we are considering using the MIVAN technology, which will aid in faster execution of work, especially in tall towers. Moreover, we are trying to set up our own backend facility and work on RMC units for ourselves. In additon, we already have some vehicles that are processing units to bridge the gap between a contractor and RMC supplier.Any comments on the current issues plaguing the real-estate industry today?Our main problem is the lack of a single-window clearance. We are stuck with the same old system that has been going on till date. Instead of approaching different departments to seek various approvals, which takes up to a year, the duration could be reduced to a month or so; this would indirectly bring down the cost of development, too.Also, with the Parliament’s continuous refusal to grant real estate an industry status, we still have little access to loans at reasonable interest rates from domestic and foreign markets. An acknowledgment of the same in the recent budget could have made bank financing simpler for realty companies.How do you view Sunteck’s growth in the coming year?Our focus remains on residential spaces; we expect the demand to remain strong in Mumbai. We intend to launch one or two more projects in FY12-13. Our aim is to be amongst the top 10 listed companies in the country.Fact Sheet:Year of Establishment: 2000Top Management: Kamal Khetan, Chairman & MD, Sunteck RealtyNo. of employees: More than 150 paxCentre of operation: MumbaiOngoing Projects: Signature Island, Signia Pearl, Signia Isles, Signia High, Signia Oceans, Sunteck City (Goregaon), Signia Orion and Sunteck grandeur + Sunteck Kanaka (Goa) and Signia Skys (Nagpur)Upcoming Projects: Mulund, Goregaon and two more projectsTurnover: Rs 32 crore for FY10-11 (consolidated figures according to project completion method).Give us your inputs on this article, write in at feedback@ASAPPmedia.com