Ashok Chhajer, Chairman -; Managing Director, Arihant Superstructures

31 Jan 2022 , 05:47 PM

In an interaction with Mamta Maity, indiainfoline.com, Mr. Ashok Chhajer Chairman & Managing Director of Arihant Superstructures said "Overall, we are very positive on the residential segment of the real estate market and believe the sector is just in the early phase of an upcycle."

Could you brief us about your company its journey, and milestones?

We started our journey as a real estate division of the Group in 1994, there on identified Navi Mumbai as the next area of Growth. Around Year 2000 we achieved a significant milestone of completing 10 Projects and by 2004 we completed construction and delivery of 1 mn square feet of residential projects. Till date, the Group has completed over 8 mn sft across ~60 projects and handed over around 10,000 homes. Arihant Superstructures Limited is predominantly focus is on the affordable and mid-income housing segment which form over 96% of our total portfolio of projects aggregating ~12 mn sft. We have dominant presence in high growth regions like Mumbai Metropolitan Region (Vashi, Kharghar, Taloja,  Panvel, Kalyan, Badlapur, Karjat & Khopoli) and Jodhpur. The company strives to provide best in class features and amenities which are further standardised across projects. This is one of the reasons Arihant is a preferred developer for the customers as evinced by many awards that we have won till date including the coveted Economic Times Award for providing best quality in affordable housing and Hot 50 Brands in Mumbai by Hindustan Times.

Your revenue has grown at 20.5% to Rs. 88.67 crores with strong EBITDA margin of 20.8% during Q3 FY22 will this trend continue going forward

Yes, also for the 9 months period of FY22, EBITDA has grown by 84% year on year to Rs. 54 crores and has surpassed the full year figures for FY21. If you see, we have been quite consistent over last 6 quarters in our performance on operational as well as financial front. Our robust performance reflects our endurance, our consistent efforts towards quality and trust gained over the years. Arihant has completely integrated in-house capabilities of Land Acquisition & Procurement, Liaison, Design & Engineering, EPC and Marketing & Sales. This further ensures tight control and quality considerations.

The company has also invested in technology to streamline processes which is yielding results. With favourable macro-economic outlook for the real estate cycle, low inventory levels and improvement in pricing scenario, the EBITDA margins should improve over next 18-24 months. With this we stand at the threshold of the next big thrust for the Real Estate Sector and leap towards our future upcoming developments.

Where do you see sales trending in the next 12 to 24 months? How do you see the upcoming projects contributing to the growth of the company?

Last year we sold close to 8.7 lakh sft amounting to Rs. 400 crores. In the 9 months of the current financial year, we have sold about 10 lakhs sft valued at Rs. 520 crores. We are seeing strong sales momentum and beginning of upcycle in real estate. Over the next 2 years we aim to grow by CAGR of 35-40%. We have invested significantly in the human resources over last one and a half year and we are now 130 people highly motivated sales team working towards the organizational goal.

On the second question, ASL has a portfolio of ~12 mn sft of which 4 mn sft is ongoing and balance is forthcoming projects. The lands have been fully paid up for the same. This has a potential to contribute Rs. 7,000 crores in cashflows over next 7 years. Accounting for costs to complete these projects, the net operating cashflows would be in the range of Rs. 2,600-2,800 crores. And this does not include the new projects that the company will acquire from the surplus cashflows.

What is the strategy of the company going to be in the coming years?

The company believes it is ready to capitalize on the tailwinds available to the real estate sectors. The company with its proven strategy focused on operations, ensured timely completion of construction of projects & delivering possessions year on year despite a slump in the Real Estate market especially in the years 2017-2020. With thoughtful strategies and efficient execution, the company managed to surpass its historical numbers from top line to bottom line in financial year ending March 2021. At the same time, it reduced the total debt by INR 96 crores since 31st March, 2020 while significantly reducing the cost of debt. With this background, the company intends to increase the total portfolio to 20 mn sft by way of acquisition of new land parcels and through asset light model such as joint ventures or joint developments. This shall be done through internal cash flows & raising of funds at project level or entity level.

Also, we are very cautious in choosing the right kind of projects which helps to lower the risk and management issues later on. The key identified expansion markets include Navi Mumbai, Panvel, Kalyan, Dombivali, Badlapur and other locations in MMR offering similar propositions.
 
How you see Residential real estate as a sector in the coming years?

The residential real estate sector, especially the affordable housing segment, is expected to be in limelight going ahead, as it benefits from central and state government’s favourable policies. Rising income levels, renewed interest from first time home buyers in the post-covid era and best affordability levels in last 25 years are expected to drive sales for quality organised developers. The sector is also expected to benefit from low interest rates, which provides twin benefits in driving demand and reduced funding cost. Further, organised players are expected to benefit from ample inorganic opportunities, which is leading to consolidation in the sector.

The market share of organized developers is steadily increasing giving credibility to the market. Implementation of RERA has led to increase in transparency and trust. The government recognizes the contribution of the sector towards achieving the nation’s developmental goals.  Overall, we are very positive on the residential segment of the real estate market and believe the sector is just in the early phase of an upcycle.

If we look at Arihant’s category wise portfolio mix we can see majority being in affordable housing segment how you see affordable housing demand scenario in India panning out ?

We entered into affordable housing much before it became a zing thing. In fact, the theme of our 2015 annual report was “Factory of Homes” detailing how housing should be operated as a manufacturing business. It is more true for affordable housing segment. As per a recent report done by Liaises Foras, the sales in below Rs. 60 lakh category is estimated to grow at the fastest by a CAGR of 16% from 162 mn sft in FY21 to 396 mn sft by FY27. In the same category, MMR will witness a similar growth from 24 mn sft in FY21 to 56 mn sft by FY27. From a pricing point of view, less than Rs. 5,000 per sft is the best performing segment with a share of around 55% in MMR sales. We have 61% of our project portfolio in this category.

Recently, the state government has also  announced the property tax waiver for Mumbai and Navi Mumbai for area up to 500 sft which will aid sales in this segment. Several schemes for affordable housing have been introduced by the government in recent years, including interest subsidies for low and mid-income sections, affordable housing being granted infrastructure status to ease fund availability, and additional tax benefits for both developers and homebuyers. The need for affordable housing is growing across the urban sprawls of India and considering the demographics of the country, it will remain an attractive segment for a long time to come. Developers who have built capabilities, systems and processes towards this end will be the front runners to benefit from the same.

What are your expectation from the budget 2022-23 ?

The real estate industry contributes 7% of the total Indian GDP and is the second highest employment sector after agriculture. It is also contributes more than Rs1 lakh crore by way of taxes and duties. The sector also helped the economy to get back on track post the first wave of pandemic and has shown tremendous resilience. In this backdrop, we expect the government to support this revival by favourable policies. The rebate on housing loan interest rates can be increased to Rs5 lakhs per annum as the current limit of Rs2 lakhs is quite low.  It has been a long standing demand of the industry to accord it an infrastructure status which can improve the credit facility available to the sector at a low cost. The government should also consider bringing back the CLSS benefit for MIG segment and continue it for EWS and LIG segment beyond March 31, 2022.

Additionally, they can consider relaxing the definition of affordable housing, removing the Rs45 lakh cap for affordable housing and extending section 80IB benefits beyond current fiscal. We are expecting a higher budgetary allocation to and extensions for flagship schemes like the Pradhan Mantri Awas Yojana (PMAY).

And lastly, what are the core values that drives Arihant?

The brand Arihant rests on 4 core principles — Efficiency, Consistency, Stability and Scalability. Each decision we take, whether it is a new acquisition, product development, sales strategy, entering & developing new markets, etc., we look at all of it through the filter of these four principles. At a more fundamental level, the policy of the company is to share wealth with all the stake holders and contribute to the well-being of society at large.