Reflections on the real estate industry from 2018
The real estate market has proved to be resilient in 2018. Despite witnessing several major policy changes with the implementation of RERA and GST, we have still managed to do well as an industry. There is stress in certain quarters, but the developers who are established, show commitment to corporate governance and transparency, are succeeding. With GST and RERA stabilising, the real estate sector is on the cusp of a complete makeover. The buyers and the developers have reconciled themselves to the additional costs, and the market is all set to witness further growth. There have been several new launches in the market, rents have gone up and the commercial sector has been thriving with close to zero vacancy rates.
Prestige Group – Highlights of 2018
As far as Prestige is concerned, it has been quite an amazing year for us. Among the most exciting highlights in 2018 was the fact that we completed 10,000+ apartments and over 100 million sq ft of development, which are significant milestones for any real estate developer. We also completed one of our most prestigious and luxurious developments with Kingfisher Towers, which we inaugurated on November 30, 2018. Considered an engineering miracle, it is yet another landmark to dot Bengaluru’s skyline. Apart from this, we completed Phase-I of Prestige Lakeside Habitat, the largest residential development by the company till date, in terms of acreage and the total number of residences. The 102-acre property is the biggest upcoming residential township development in the country today.
In addition, we completed and inaugurated two of our most prestigious hotel properties, namely Conrad Bengaluru and the Sheraton Grand Whitefield Hotel; and Convention Centre, Prestige Shantiniketan. We also opened two more ‘Forum’ malls with Forum Shantiniketan in Whitefield and Forum City Centre Mall in Mysuru, and acquired a mall in Udaipur. Apart from this, we have completed about 3 million sq ft of IT office space, mostly in Bengaluru.
2018 also witnessed the launch of several residential properties including Prestige Jindal City (Bengaluru) and Prestige Courtyards (Chennai), to name a few. These have all met with fair success. Moreover, the overall business, in terms of sales and leasing, has been quite good. We have seen some great momentum.
In terms of retail, we are currently one of the largest mall owners in the country, and have done well in this segment this year. The footfalls have been good and all our malls have done great business. Having said that, the retail sector is one where you need to have focussed activity. I believe that all malls are not going to succeed. We are witnessing success with our malls primarily because we have managed to instil that trust among our tenants, where they allow us to guide them, which is a rarity in this industry. Moreover, we are able to understand and establish the right product mix into our retail malls. All our retailers are trading well, and within this, Forum Koramanagala continues to have the highest yield per square feet.
Warehousing and logistics is another asset class that we are concentrating on. We completed Prestige Logistics Centre (Mallur), our first warehouse centre in the state, and that has been leased out to Flipkart. Prestige Group has been a pioneer in developing IT and office parks in south India with an occupier tenant portfolio of global and Indian corporations. Various policy decisions like the implementation of GST and the e-way bill have given a boost to the logistics sector as well. This, coupled with the growth in the e-commerce and retail sectors, have necessitated a sharp growth in warehousing in the country, and we foresee a huge demand for plug and play in this space.
Additional highlights from 2018:
Prestige Group, through its subsidiary, concluded acquisition of CapitaLand’s stake in various SPVs for a total consideration of around Rs 342 crore . With these award-winning properties located in key growth markets across India, the acquisition boosted Prestige’s annuity portfolio with an estimated incremental rental income to the tune of Rs 75 crore per annum. In addition, the acquisition included a 143-keys operating Oakwood serviced residences in Whitefield (Bengaluru), with a revenue of around Rs 190 million, and a residential project with a potential developable area of 0.6 million sq ft in Kochi.
Prestige Estates Projects (PEPL) also entered into a strategic partnership with HDFC Capital Advisors for furthering its business in the mid-income or affordable housing sector. This dedicated real estate platform has a capital to the tune of Rs 2,500 crore, which is a blend of equity and debt. The primary focus is on expanding Prestige’s residential business by identifying strategic land parcels with the potential of developing large-scale residential projects in the mid- income segment.
Prestige Estates Projects entered into a binding agreement with Sterling Urban Infraprojects for acquisition of 80 per cent stake, held by investors and its affiliates in Sterling for a cash consideration of Rs 336 crore. Sterling owns land parcels of around 59 acre in Outer Ring Road – Sarjapur, Bengaluru. Prestige intends to develop a state-of-the-art commercial office space with over 6 million sq ft of developable area.
Prestige Group – Plans for 2019
Currently, we have several projects running in Ahmedabad, Hyderabad, Chennai, and Bengaluru. One of the biggest highlights of 2019 for the Prestige Group will be our launch in Mumbai. We have officially entered Mumbai with a property in Byculla, and are in the process of securing all approvals for its launch. In addition, we have got the approvals in place for our Pune land which we obtained about 18 months ago. We hope to launch that in Q1 of 2019.
Prediction for the real estate industry for 2019
Though it is an election year, 2019 is expected to be a good and productive year, with the market being stronger than it was in 2018. We also expect it to be much more positive with much better sales and revenues as we go along.
The residential real estate market is expected to grow significantly in 2019. In a country like India, given our population, the need for housing is constant. Other factors like urbanisation, the rise of nuclear families, increased disposable incomes, and monetary benefits have all further contributed to create a stronger demand for housing. Affordable housing is, of course, the need of the hour. Having said that, I expect housing across categories to do well. Luxury housing, being a niche market, witnesses a slower momentum. Given that there is quite a lot of inventory in the market currently, luxury housing will continue to move slowly. But having said that, it is not necessary that one will trade off with another. Depending on the supply that comes in, the market will start stabilising overall across all segments of housing.
Finally, I want to end this note with a quote by Mahatma Gandhi – “Be the change that you wish to see in the world.” We all need to do our bit, both to evolve as individuals and to ensure progress.
About the Author:
Irfan Razack is Chairman & Managing Director at Prestige Group.