We expect positive momentum in realty sales in year ahead: Pavitra Shankar

Bengaluru-based Brigade Enterprises posted its highest ever sales of 4.72 million sq ft in FY22 with a total value of Rs 3,023 crore. Pavitra Shankar, executive director, talks to Raghavendra Kamath on the company’s plans for different segments of real estate and her views on inflation and rising interest rates. Excerpts:

In FY22, you recorded the highest ever residential sales. Can you explain what led to this record number?

In FY22, we achieved our highest ever pre-sales number of 4.7 million square feet with a booking value of Rs 3,000 crore. The value proposition of the location, design, floor plans and amenities, in conjunction with the brand promise of quality, on-time delivery and customer service, is what enables us to keep selling regardless of any market challenges. We have a good sales team and the right sales strategy in place, supported by well thought out marketing initiatives and a robust distribution network.

With the Reserve Bank of India (RBI) raising rates, do you think developers such as Brigade will face headwinds in terms of generating sales. What is your outlook for sales?

The environment is unpredictable due to the increase in interest rates and future expectations of increasing interest rates. This will impact buyers who intend to take home loans. However, the rates are still fairly low compared to a few years ago. Our demographic target is salaried workers in IT, technology, research, BFSI and similar white-collar jobs. They have not had high discretionary spends over the last two years. They have also seen salary growth, and so, from an affordability standpoint, we do not expect a major negative impact. We believe there has been a structural change in demand for real estate from trusted brands like ours. So, we continue to expect positive momentum in sales for the coming year.

How many new projects and phases are you looking to launch this financial year?

We plan to launch 8 million square feet in residential projects and 2 million square feet in commercial projects in FY23.

What are your plans for the office and mall segments? How has the office segment performed in terms of rent collection and occupancies in FY22?

We are in the process of leasing 2 million square feet of vacancy across our portfolio from newly operational projects, and have a very good active pipeline. Rent collections have remained stable in the 97 per cent-plus range. We are investing about Rs 600 crore towards Brigade Twin Towers, a niche office development in Bengaluru. We remain bullish on high quality and well-designed office space in good locations across our target markets. We will continue to build out retail as part of our mixed-use projects.

Why has Brigade remained largely a South-based player when others such as Prestige, Puravankara, RMZ and Embassy have spread to West and North India?

We are in multiple domains of real estate — residential, office, retail and hospitality. We have consciously taken a strategic decision to establish our brand, network and capabilities in a few key markets that offer us the potential to scale across these different domains.

How are you tackling the rise in input prices? Have you increased prices? If yes, by how much and are you looking to raise prices further?

We have increased prices across our portfolio anywhere from three to eight per cent over the last year, depending on the stage of construction and exposure to increasing input costs. We continue to examine where it is possible to take up prices, provided that the market accepts them.

With increased prices, have you seen any resistance from buyers?

Our average realisation increased by 8 per cent to Rs 6,411 in the last financial year. This is not a uniform increase but an average across projects — some projects have been able to take up prices better than others. There is always some resistance to price increase. However, many buyers are willing to pay a premium for peace of mind and quality product offered by a trusted developer like us.

Do you think investors are coming back to buy apartments now that many developers have increased prices?

From 2016 to 2020, there were many fence sitters in real estate, who expected prices to fall. After the first lockdown in 2020, there was a sudden impetus to look for new homes due to most people reassessing their need for space, thanks to work/study from home. Supported by the low interest rates, this demand has proved to be sustainable, and the market is very receptive to new project launches. This is a sign that appreciation is expected and that real estate will be a good investment. Also, given the volatility in the stock market, real estate seems like a safer bet. Investors expect prices to increase further, which is why they are investing now in real estate despite higher prices.