There is a bit of a dichotomy out there in your numbers. While your sales and collections look healthy, we have seen some slip in collections, as well as PAT. What has really transpired over the quarter gone by and where do you look at things going forward?
Boman Rustom Irani: I am very happy to state that we had a great year. Our pre-sales have been Rs 2,266 crore, that is up about 41%, whereas our guidance was in the region of about 25%. So, we are truly happy with that. Our collections have also been at Rs 2,203 crore which again is 18% up from last year. Our OCF has also been, that is the operating cash flows that we have generated this year, Rs 643 crore which is up by around 40% from what we generated last year.
Our teams have been on the ground with business development and acquisitions have been extremely healthy. We have taken in close to around 4.1 million square feet of developments for the coming years and there are 10 projects of which about seven have been in the mid, mass and aspirational category which we continue to believe will be the strong seller in the Mumbai and the MMR areas that we are doing.
Redevelopment continues to be a strong forte for us. And while we have been strong in the western suburbs, eastern suburbs, now we are also moving because of the infrastructure growth that is taking place in the city. We are moving towards SOBO and looking at taking up redevelopment out there and we are in the process of doing that. So, FY24 has been great. But today we are at an inflection point and we believe that FY25 will be a much bigger year for us and our teams are working hard on it. And my congratulations to our entire team for performing very well and my best wishes to all of them to seize the year ahead.
If I compare the prices in the major cities – the NCR region, the Mumbai region with Hyderabad or Bangalore, why is price escalation not as strong in Mumbai as in other parts of India Is this largely because of demand-supply mismatch?
Boman Rustom Irani: Whenever prices suddenly peak up a lot, people ask why are Mumbai prices peaking up so much? I think it is the overall present demand, which is extremely strong. At the same point of time, developers have been able to keep prices down, thanks to government initiatives that have come in, Mumbai has seen a large amount of cluster redevelopment taking place and where the government has encouraged the developers to go ahead with cluster development by giving a 50% only in premium collections thereof, which allows developers to keep prices down.
Other than that, building efficiency has also really worked. The long-term perspective taken by developers is that velocity is the premium and not really the price increases as such. Overall, we at Rustomjee believe that mid, mass and aspirational – which is the Rs 1-3 crore and Rs 3-7 crore homes should continue to be something that can grow and where our consumers can continue to afford them and buy them and look at growing their investments in the real estate portfolio. I am actually very happy to see that prices are not peaking as much in Mumbai as normally people would have expected them to be.You had earlier guided for a 25% growth in sales. That number has come in at 41% for FY24. What is the outlook then? You are comfortably looking to exceed projections?
Boman Rustom Irani: We at Keystone Realtors believe that we should be very watchful about the kind of future demand that is getting generated or at least our guidance on it and then try and outperform like we did in the past year. The strong real estate cycle of Mumbai, MMR continues and I am very happy to state that the overall markets are performing at peak. Today, super premiums have seen almost a 7% spike in sales, whereas at Rustomjee, about 56% of our sales come through mid, mass and aspirational. I think that FY25 is going to see a similar trend. Super premiums and premium homes will continue to grow in this market and continue to gain headlines. At the same point of time, the homes that really matter or the largest part of the segment will continue to be in the Rs 1-7 crore segments with the western suburbs, eastern suburbs coming up further, and will continue to serve this market.
The growing infrastructure is what we are watching. Earlier, we were restricted by the boundaries of Virar and maybe Thane. Today we are out in Dombivli, we are moving towards Palghar, Boisar, and we look at the markets in those areas being extremely interesting for us in times to come.
At the same point of time, like I mentioned, for our premium and super premium customers, we continue to serve them in the markets of Bandra, Versova now, and then we wish to grow into the SOBO market where we believe there will be a resurgence of residential development because for a very long time, there has not been too much of development taking place in those markets. And towards that, our teams have been working really hard.
We are also very happy to state that there were six projects launched last year against guidance of only four. We guided one per quarter. We have done six. This year, our guidance is for two projects per quarter and we are looking at exceeding that as well for the year.
That brings me to your recent acquisitions as well, your acquisition of DB Realty subsidiary, then that JV with Ajmera as well. What does it bring on the table and how are things panning out there?
Boman Rustom Irani: I have been saying this for a very long time and it is our belief at Rustomjee that collaboration brings in a lot more strength than trying to do all things on your own. I must state that my partnership with the Ajmeras is something that we look forward to. Good companies, strong family values, family-led companies had landed on a redevelopment in the suburb of Bandra in Mumbai.
We are very happy to part with them or participate with them where design, etc, is being done jointly. After that, we will set up a team for the execution of the same and we are looking at doing a totally different asset class, smaller commercial offices. Again, guidance on commercial development in the city of Mumbai, while larger spaces are also being developed in BKC and Lower Parel.
Micro markets like Bandra West are doing extremely well on the small offices front and are being occupied by professionals, startups, people getting into newer business lines and we hope to have made a fantastic example out of this partnership to be able to do many more.
Keystone Realtors, has from the very initial stages done JVs, JDs with landowners as well as with real estate developers. And so far, we have been extremely successful. We have had a long history of partnerships and we plan to continue to grow that. This also allows us to keep our investments at a low. It allows us to spread the risk and also take advantage of each partner’s stronger abilities as we go along.
If I look at the big picture, which is the economy growing at 7% to 8%, wage growth is about 5% to 6% on an average. Can I say that the real estate sector is at least poised to grow at a bare minimum 8% to 10%?
Boman Rustom Irani: The various reports that are being researched by agencies point definitely towards a higher growth taking place in the metros and Mumbai, MMR continues to be almost 40% of the real estate, residential real estate, recognised residential real estate market of the country. There is every sign pointing towards more and more development taking place following the infrastructure growth that we had not seen in such a long time and we are all witnessing the largest possible infrastructure – be it metro railways, be it road connectivity, be it the new airport coming up in the MMR area. All of this is going to add abundantly to the prosperity of this area and we, for one, have been watchful and have been following this trend or following wherever the infrastructure goes, because that is where we believe prosperity grows.
You may be bang on target by saying that at least a 10% growth year on year is possible. But certain micro markets will grow a lot more. The western suburbs have seen a very strong resurgence given the kind of infrastructure growth taking place with the metros. There are two metros that are serving between Dahisar and Andheri right now. We see these metros coming or the plan is to bring these metros towards the BKC area, which is the new CBD, and then going further and linking even the eastern suburbs.
We have got a huge announcement that has already taken place for the Thane-Borivali underground tunnel that will be connecting Thane and Borivali will cut down travel time from the present one hour to, let us say, under 15 minutes, again leading to a growth in both the places. Overall, I am pretty hopeful that all those developers who keep their heads down and keep performing, that is to say keep taking care of production and are able to consistently serve the consumer will do extremely well in the Mumbai, MMR market.
We have seen big cluster development in Mumbai. We have seen a facelift in Mumbai’s infrastructure. We have also seen the redevelopment in some projects in some old buildings in South Bombay and a lot of cluster developments are happening. How do you see the map of Mumbai changing because of infrastructure development, edevelopment, and also because of the new connections coming up?
Boman Rustom Irani: So, A) all those who live in Mumbai, the families are growing and today after Covid, people have stopped buying houses where they fit their families in. As a matter of fact, they are buying homes that are fit for their families. We have seen people spending more and over here, I would like to state Rajkummar Rao’s statement in media where he says that when he was looking for some advice on buying a house, Shah Rukh Khan told him that he should stretch a little more because that is when even God will help him and he will work harder and there is this trend overall.
People are buying homes that are, in a way, something that they have always aspired to do. Today the confidence levels are higher. And as far as redevelopment of Mumbai goes, it is a rejuvenation of this city that is taking place. In today’s standards, environmentally unsustainable buildings are getting replaced and being developed. There is a greater density coming in over there in areas that can take them.
South Mumbai, will see a rejuvenation or a spurt in more buying taking place because of the infrastructure growth. For a very long time, that market has stagnated because there were only the older buildings out there. That location is fantastic, people have been living there all their lives and they wish to continue living there. And towards that, they are extremely happy about the redevelopment surge that is taking place in the area.
For a short period of time, we will see a great amount of growing interest in that area and in that the cluster developments always help because you are in a position to provide for more amenities, more lifestyle conveniences. People everywhere are looking at homes where they have at least the basics, like a gym, a clubhouse, swimming pools, games areas, a banquet where they can host their friends or families over a celebration. At the same point of time, homes that are airy, homes that are well-developed, homes that are sustainable, or are environmentally friendly, homes with large balconies, homes with working spaces. All these are SOPs that we work with and we at Keystone Realtors continue to want to serve that market.
Cluster development will continue to be the mainstay because there are lots of areas in Mumbai where the largish developments have taken place more than 50, 60 years ago and today it is possible to create more open spaces by shrinking the footprint of the building and just going higher and it is possible to give people a better lifestyle by opening up more areas and we will continue looking at that.
The map of Mumbai will change to the extent that wherever infrastructure growth is taking place, we will allow more and more of the local population to grow out there and be able to continue to live in certain areas and continue working in the areas where either the CBDs or their own small offices. We also see hospitality taking a huge surge and that is extremely good. We are very happy with the number of newer restaurants, newer healthcare centres that are being announced. There are new asset classes that are coming in.
People are looking at mid-city aged living or advanced living developments. Gone are the years when people wanted to move out to only a Lonavala, Khandala, I mean, that is also still a reality. But at the same point of time, mid-city developments that can take care of the health needs of people is something that is strongly being looked at and our company is also looking at doing that.