In an interaction with Anil Mascarenhas of India Infoline, Mr. DS Kulkarni says, "Integrity, hard work and modesty have been the driving values for me. It is my responsibility to ensure that every DSK customer should be proud of his home. The lasting relationship with our customers is the real bottom line."
Your career progression has been awe-inspiring: from selling vegetables, undertaking painting work contracts to finally entering the construction business. What motivated you to make these giant strides?
Mine was indeed a humble beginning. I come from a simple Marathi family and faced a lot of hardships in my formative years. But I always had this entrepreneurial streak and wanted to create a legacy bearing the DSK name. Started with selling nuts and vegetables on street to painting and repairing houses, I had people recall my name with fondness and they still remember me as a person wedded to inclusive growth. It was with this passion, I started my very first venture called Tele-smell. But the bigger dream was of building homes, not houses. Since I didn’t have any technical knowledge, I had to learn the ropes of construction from scratch, starting with basic repairs and maintenance work. In good time, I ventured into construction business and established D S Kulkarni Developers Limited. The DSK group today has varied business interest in education, auto, agriculture, digital products and entertainment.
Integrity, hard work and modesty have been the driving values for me. It is my responsibility to ensure that every DSK customer should be proud of his home. The lasting relationship with our customers is the real bottom line. That’s precisely why our companies, over the years, have achieved great heights. We pioneered the development of the first township in India called DSK Vishwa in Pune. This project created a Guinness record by attracting 1,000 bookings in just 3 days. We have a good geographical presence across the globe including USA. I am now focused on my flagship project DSK Dream City, which will take the idea of a smart city to a different level.
To what extent has your business model changed over the years?
While the underlying business model has evolved with the changing requirements of our customers, our overall values have not changed. We still believe in creating value for all our stakeholders and at the same time focus on inclusive growth. We try to envisage the requirements for the next decade and accordingly plan our projects. DSK Vishwa was built around the concept of community living which was quite an unconventional thought at the time of its launch. But I was sure that this will be the key requirement for ‘home-seekers’ in the coming years. Similarly DSK Dream City is built around a novel concept of a world class city, in the lap of nature, offering a unique lifestyle.
What was the response to your recent marketing initiatives - you gave some attractive offers for homebuyers in Pune.
Talking of marketing activity, one point which bothered me all along was: Why should a customer pay home loan EMIs for his whole life. A customer, 35 years of age, who buys a house ends up paying EMIs till he is 55. When will he enjoy his life? We thought of having such scheme that will lower customer’s burden, at least partly and we launched DSK’s Master Plan wherein his home, his life will be loan-free in 10 years. Often you see if you keep paying EMI for whole loan tenure of 20 years, you end up paying almost double the amount of loan. But in our scheme, he has to pay only loan installment and not interest and that too for only 100 months. So in just little more than 8 years, he will be free of loan.
Everyone wondered how this would work but the response from buyers has been phenomenal.
How deep and wide is the Pune market? Any new geographies you plan to tap?
Pune’s housing industry is not investment driven – it is driven by actual home-buyers. Pune is one of the top eight real estate markets in India. In its latest report, Knight Frank Research reported that in H12015, Pune was the only city that showed higher absorption than launches in the residential housing market. Pune is also one of the few cities that is expected to achieve a rise in sales over last year with the shift of IT-SEZs from Bangalore to Pune, the demand for housing in the city is set to increase. We are also looking at viable opportunities in out skirts of Mumbai and Pune. Further, we are also exploring Chennai as a potential market.
Interestingly, you have some project in New Jersey (USA)? Are some of clients Pune-based or is it just a new market entry?
USA Real estate market is very different as compared to India. In line with our diversification strategy, we decided to test the US market when there was real estate boom in 2006. The underlying idea was to tap the Indian Diaspora in USA, who would connect with DSK brand. These could then be the potential investors for projects in India. We didn’t get Pune-based clients but sold almost all the units.
Comment on your business mix. How much of your revenue comes from your main categories like Luxury, mid-income and townships?
The current mix is as follows: Mid Income: 80%, Semi-Luxury and Townships around 20%. The luxury projects are luxury in terms of amenities, but in terms of pricing they are affordable. Revenue from Townships is expected to increase with the upcoming Dream City project.
Your dream-city sounds very ambitious given the slowdown being witnessed in the sector.
DSK Dream City will take the idea of a smart city to a different level. The project has been conceptualised keeping in mind the requirements of our next generation. The basic idea behind the concept is a world class smart city which provides a holistic lifestyle combining sports, nature and all the other key elements of an elevated living.
DSK Dream City will be a township spread over 250+ acres and just 23 kms from Pune City Centre. DSK Dream City will have ultra-modern structures that line a 4.5km artificial river. It will be within convenient travelling distance of 3 major IT-SEZs which are being developed in the Eastern Pune area. It will maintain primary and secondary-level schools in its Knowledge Centre which already has a running College of Animation, Gaming and Industrial Design. It will house 9 sports academies. One of the football academies is currently being managed in tie up with Liverpool FC. DSK Dream City will provide ample recreational facilities including public bicycles, water ferries, theatres and malls. The township will have a lush green setting designed by renowned architects from Dubai. The built up area of the project will be 16 mn Sq. Ft, with over 10,000 flats. The project is the outcome of my vision of an urban community in harmony with Nature. The Project is running on schedule and we do not expect any delays.
Falling interest rates, rising incomes and the new generation aspirations all ideally point towards a healthy demand for new houses. What’s preventing the industry from doing well?
Currently, sentiments are subdued because of higher inventory levels in the system and demand supply mismatch. Also, the prices had risen substantially from the period 2006-2012, so what we are seeing is the time-wise correction. With all the factors as mentioned by you above, demand will again pick up sooner than later.
Comment on your land bank
Land acquisition is something which I personally oversee. I have a very different and strategic approach to acquiring land. We endeavour to monetise land over a period of time, as can be seen in case of Vishwa Villa. We are still monetising that parcel of land and have recently commenced construction of Phase 8 of Vishwa. Our existing land bank is strategically located and we currently hold close to 400 acres of land. These parcels have been acquired at historical rates and hence are quite valuable at present rates.
What changes are being seen in the construction methods of your projects? What is the cost saving here?
There are many technological changes being adopted in the construction in the recent past such as aluminium form work, commonly known as ‘myone’ technology. We have imported this material from Korea and it has specific measurements that all the units/ structures will be same. It’s easy to use and floors can be constructed fast. It saves money and reduces completion time. We try to source material from anywhere in the world that gives us cost advantage.
In the affordable housing segment, standardisation of design can gives us cost advantage in respect of design, specifications, materials, etc.
You have also taken initiatives in rain water harvesting. Could you elaborate on your environmental-friendly measures?
The first township taught us a lot on how to keep environment healthy. We pioneered gardening, STP, rain water harvesting, etc. through this township. This Township has been designed keeping in mind the deteriorating environmental situation. Hence it was important to develop a sustainable way of living without putting additional pressure on our already existing scarce resources. The township land parcel consists of 32 wells. We are trying not to waste a single drop of water. Now currently in the drought like situation we are utilising water from these wells only and not from PMC.
The waterway is being managed by Crystal Lagoons from Chile. Use of safe chemicals would ensure that the water remains clean, crystal blue with minimum evaporation. We are the pioneers in using Sewage Treatment Plant in our first township which reuses water for different purposes. We will be doing the same in this township also.
Brief us on your financials. What’s the outlook?
Total Income grew from Rs.2,033mn in FY12 to Rs.3,578mn in FY15, 3 year CAGR of 21%. EBITDA grew from Rs.147mn in FY12 to Rs.363mn in FY15, 3-year CAGR of 35%. PAT grew from Rs.4mn in FY12 to Rs.149mn in FY15, a 3 year CAGR of 223%.
What is your message to shareholders?
We will continue to build an organisation not only focused on creating superior shareholder value but providing an ecosystem of growth to all stakeholders. Yes, the economy is a little gloomy, especially for the real estate sector, but things will only improve from here on – what with the Real Estate Regulator coming into being and the Indian economy moving in the right direction of development. We remain committed to inclusive growth in a sustainable manner.