CEO SPEAK - `Demonetization drive will curb the role of black money in land deals'
Malhotra hailed the government's demonetization drive saying it will help in curtailing the role of black money in real estate, particularly in the land deals. He said this will also help in bringing prices to realistic levels.
“Ultimately, the product has to be built and priced in the range where there is demand in the market--if prices have to be corrected, it will happen fast and efficiently in a transparent market, where the role of unaccounted money is less,“ Malhotra says.
Excerpt of the interview:
HOW IS THE MARKET POISED?
The sentiment in residential market is really bad. This is because of a number of reasons including delay in completing projects and giving delivery of apartments to buyers. There are also cases where buyers are not satisfied with the quality of delivered houses.
The negligence of local authorities in developing infrastructure around projects has also contributed to this.
WHAT IS YOUR MODEL OF DEVELOPMENT?
We as a group don't invest in land. Instead, we enter into an agreement with landowners to develop, manage, sell and maintain a project. For this, we charge certain percentage--between 12% and 15% of the sales proceeds--as our management fees and profit.
After paying for the construction from the sales proceeds, enough money is left for landowners to pay for land cost and their profit. But, we maintain high quality of construction and ensure timely delivery.
Ultimately, we lend our brand--Godrej-to the project. The cost that we charge is to meet our expenses of hiring management experts and high quality engineers to ensure that the quality of projects meet the aspirations of buyers and are delivered on time. We are highly conscious of our brand. We also go for joint ventures with the landowners where we share profit.
THERE IS GENERAL PERCEPTION THAT YOUR CHARGES FOR CONSTRUCTION ARE VERY HIGH.
This is not true! We don't construct houses ourselves. For this, we hire outside agencies. The landowner is also a party in selecting the agency. The whole process is very transparent.
As for the question of pricing, we price a product for which there is demand in the market. The cost of construction depends on that and, accordingly, we promise the specifications. But once we have committed on this, we deliver houses with the same specifications.
At present, we are constructing a project in Badlapur near Navi Mumbai, at Rs 3,500 per sq ft. If the market demands affordable houses, we will go for it. Ultimately, it is the market which will determine the price and the product which will sell.