Kamal Khetan, chairman and managing director, Sunteck Realty

Sunteck Realty is planning to launch around 2.5 million square feet of residential projects by FY23, which is part of the company’s robust launch pipeline of 18 million sq ft planned for the Mumbai Metropolitan Region (MMR) over the next few years. Kamal Khetan, chairman and managing director, Sunteck Realty, tells Shubhra Tandon that the company has taken advantage of the government’s concession scheme for approvals and will lead to a total savings of Rs 250 crore. Excerpts:

What is the launch pipeline like for the coming months in the MMR for Sunteck Realty?

We have launched Phase 1 of our 50-acre Vasind project recently and are planning to launch Phase 1 of another project in FY22. The remaining two projects are under the planning stage and Phase 1 of each of the projects would be launched in FY23. With this, we would be launching 10-15% of the total development area under Phase 1 of each project, totalling about 2.5 million sq ft of the development area of the 18 million sq ft over the next few years.
The launch pipeline is particularly looking strong in the MMR because developers have taken advantage of the government’s concession scheme, under which if developers gave upfront amount for all the approvals needed for their projects, they got a 50% concession on the same. Have you taken advantage of this?

Yes, our strong balance sheet, with a debt/equity ratio of 0.18x, allows us to take advantage of this scheme. It will lead to total savings of around `250 crore for Sunteck, which will offset any increase in construction costs due to rise in commodities prices and enable us to deliver quality products at attractive values to our customers.

What sort of impact do you see on supply in FY22 as a result of the above move?

Only the financially-strong developers will be able to take advantage of this scheme. Thus, we do not see any unexpected supply increases. In fact, overtime, there has been a correction in launches and the unsold inventory in the MMR has come down considerably to approximately 2.3 years, including the stalled projects. So, for branded organised developers like us, the overall environment looks very positive over the medium- to long-term.

What is the outlook on prices in the coming months? Last year, the discounts and offers were steep and developers cleared out a lot of inventory. What are prices going to be like?

Given the reduction in unsold inventory – along with a spike in construction costs due to raw material price rise and an increasing industry-wide consolidation – we believe the prices of quality products in robust micro-markets will remain firm, and may even go up in time.

You are understood to be in discussions for a few joint development agreements (JDAs). How are those plans moving and what can be expected?

We are executing our JDAs through due diligence, as per our plans. Since the first wave of Covid-19 in 2020, Sunteck has been the largest acquirer of highly value-accretive projects in the MMR – a trend it sustains even today. <
In fact, the company has considerably accelerated the acquisition momentum post the second wave. Shahad (Kalyan) is our fourth acquisition since the advent of Covid-19 pandemic. Before this project, the company has done three project acquisitions at Vasai, Vasind and Borivali, totalling about 8 million sq ft and this project will add another about 10 million sq ft, thus, adding in total 18 million sq ft to Sunteck’s portfolio.

Having acquired more projects than most large developers during the lockdown in FY21 on attractive terms, analysts are positive on Sunteck’s value-accretive acquisition strategy. Your comments.

Market consolidation in favour of quality and well-funded real estate companies has been an ongoing trend and Sunteck has been a key beneficiary of this trend, continuously expanding its business portfolio with attractive return opportunities. We are glad the analyst community are seeing value in our research and execution.

What are the investment plans for FY22?

The events of last year have provided a unique opportunity to financially strong and prudent cash flow management companies like ours, to do project acquisitions without hurting the internal capital allocation by using the asset-light model. Going forward, we shall be happy to look at potential transactions which are aligned to the business ethos of Sunteck and convert them if the business plans meet our internal IRR targets.

Any fund-raising plans for the year?

Currently, we do not have any plans. Any decision on the same shall be taken carefully after factoring in the value creation that the new funding can bring to the table.