Brigade Enterprises says corporate decision delays impact SEZ property rentals
Brigade Enterprises CFO, Atul Goyal told CNBC-TV18 that their main commercial properties are in special economic zones (SEZs), which have been struggling all over India. The company has around 1.2 million in SEZs, which it expects to fill in the next four quarters.
Realty firm Brigade Enterprises on Friday (August 25) said the company is facing a unique challenge in its property portfolio. While the company has successfully leased out all its non-SEZ commercial properties, it grapples with a different reality within the confines of Special Economic Zones (SEZs).
In an exclusive interview with Atul Goyal, CFO of Brigade Enterprises, he acknowledges that SEZs across India have been grappling with sluggish demand, and the company currently holds approximately 1.2 million square feet of vacant space.
The uncertainty stemming from global economic factors, such as the talk of a looming recession in the United States, has left the company puzzled as to why businesses are delaying their decisions to rent within these SEZs, he said.
However, amidst these challenges, Brigade Enterprises is pinning its hopes on its existing clients, the majority of whom are Global Capability Centers (GCCs), and their expanding requirements. The company believes that this strong client base will drive demand and enable them to fill the vacant 1.2 million square feet of SEZ space over the next four quarters, Goyal added.
Brigade Enterprises' primary commercial properties are located within special economic zones (SEZs), a sector facing challenges across India. The company possesses approximately 1.2 million square feet within these SEZs, and its projection is to achieve full occupancy over the next four quarters.
Below is the verbatim transcript of the interview:
Q: Give us a few details about the sales deed for acquiring around 6.5 acres of land in Chennai to develop a residential project, what is the cost of acquisition and give us some kind of details on the timeline of this launch, what kind of a project will be and sales potential?
A: It is a 6.5-acre land and it’s a corporate land, which we have bought, and it is on the main Old Mahabalipuram Road (OMR). We already have a big development there with GIC, which is a World Trade Centre in Chennai, and we also have a residential attached to it. So, it's a very prime property. We have acquired it for Rs 145 crore and we expect around 1 million or so development there, which will be mainly on the residential side.
Q: A million square feet of saleable area at what price?
A: It's difficult right now, but around 10,000 is a minimum by the time we launch, it should be much more so around gross development value (GDV) will be in the range of Rs 1,000 crore or so.
Q: Any more land buys that you are looking at, at the moment and what are the areas, and geographies that you are looking to buy land at, what is the corpus that you have outlined for this?
A: We are looking for land and as the sales are very good in residential. We recently bought, in an auction, in Hyderabad for 9.5 acres, which was for an overall Rs 660 crore. So, we are trying to take land more in Bengaluru, Chennai, and Hyderabad to spread our baskets so that everywhere we can do the launches. Right now, the maximum launches and sales are from Bengaluru. So, we are looking for land everywhere and trying to take good land. Overall, we should do around Rs 500 crore per year of land acquisition based on how the market demand is there and how the sales go ahead in coming quarters.
Q: You already have a 340-acre land parcel in Bengaluru currently. How much are you planning to grow it by and what is the pipeline for the next 6-12 months in terms of new launches?
A: In new launches, we are planning around 7.5 million or so. Yes, there has been some delay in approvals, but definitely we are targeting around 7 million or so launches, there can be some delays, because there are some launches from Chennai e as well. So, based on the approvals and the RERA approvals, we will try to launch that much. Of course, Bengaluru will always remain a mainstay for that company. We are doing more acquisitions in the form of joint development agreements (JDA) or in the form of acquisitions, but our prime focus today is Chennai and Hyderabad because we want to increase our focus in both cities. In Chennai already we have bought land for around 12.5 million. Hyderabad, we have started. So, the focus is on all three cities and Bengaluru will always be focused because it is a prime focus for the company.
Q: In all three cities, Chennai, Hyderabad, and Bengaluru, could you clearly tell us how much is the saleable area that you are sitting on at this point?
A: In Bengaluru, it is around 33.3 million. In Chennai, it is 12.5 million or so and the rest is others. Of course, now, Hyderabad will also get added to it which will be in the range of 3.5 billion of development in Hyderabad.
Q: There have been a lot of NRI investments in the real estate market. Are you observing that sort of a trend as well in your projects?
A: Yes, some NRI investments are definitely there, but I would not say that there has been an increased demand; yes, demand is there. Bengaluru is a market, people like to settle here because of the talent, that is there. So, demand has increased, but I will not say it to a very great extent.
Q: I (Sonia Shenoy) recently visited the city, and I realised that there is not only rapid urbanisation in Bengaluru happening right now, but there is also a big destruction of the green cover, which is, of course, another issue altogether. But I take your point that, you know, things are definitely picking up but that's on the residential side. Right. Tell us a little bit about the commercial side of things. This time again the commercial demand was a bit on the weaker side. What is the occupancy like and what is the way forward for you?
A: For us, the main commercial demand, and the commercial properties, we have are in a special economic zone (SEZ). And, of course, SEZ has been struggling all over India. Non-SEZ, we do not have any vacancies, everything has been leased out. So, in SEZ, yes, there is an issue we have around 1.2 million and of course, the talk of recession in the US, which has never come. So, I don't know how the companies have been delaying their decisions to rent in these SEZs. But, of course, we are looking for lots of demand from the existing clients because a maximum of our clients are global capability centres (GCC), and they are looking for good expansion and we should be able to fill this 1.2 million in the next four quarters.
Q: Can you give us the numbers? In FY23, your lease rentals were about Rs 750 crore odd where will it be like at the end of FY24? And you have about 8.5 million square feet of operating commercial portfolio? Do you plan to grow this further? Just those two numbers if you can help us with.
A: Rentals should go in the range of Rs 850-900 crore this year. That is what we estimated. And of course, for additions we have one project which is called Twin Towers, where we have 1.3 million square feet which will be completed next year. And definitely, it's a non-SEZ. So that is the main lease area which we will be launching in the market. There are some 1.3 million developments in Whitefield also. So that is also coming up, but that will take time of at least two-and-a-half years to come up.
For more details, watch the accompanying video
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Stampede-like situation disrupts Rahul Gandhi, Akhilesh Yadav's joint rally in Uttar Pradesh
May 19, 2024 4:26 PM
Ladakh Lok Sabha election: With Independent candidate's entry, it's now a 3-way contest for BJP and Congress
May 19, 2024 4:01 PM