Lap of luxury
A couple of years ago, when the Mumbai real estate market first heard that residences in a particular building in the Bandra Kurla Complex would be sold for Rs 40 crore and going as high as Rs 65 crore, it seemed to defy logic. While some were wonderstruck at the judgement behind such prices, others saw an opportunity and believed that this is the way to go.
Even more surprising was the news that the developer is offering expansive apartments ranging from 7,000 sq-ft to 11,000 sq-ft as shell units (with little or no walls inside and no fittings) and is relying on the new owners to work out the modalities of doing just what they want their home to look like. The apartments at Signature Island, the property that is commanding these lavish and enthusiastic prices, is targeted at the ultra high-net worth individuals and comes in Mumbai’s newest central business district (CBD).
Kamal Khetan, chairman and managing director of Sunteck Realty and developer of Signature Island, took a calculated risk when he thought of this concept. It seems to have paid off. “Signature Island turned out to be a game changer in the real estate market. When we launched the project, prospective buyers seemed unsure early on of acquiring a residential space in BKC as it is a business district. For us, it was our vision and we wanted to capitalise on this and get a first-mover advantage.”
Khetan cites several reasons for building the ultra-luxury residential complex. With the myriad number of offices in the nearby district, besides the convenience of two five-star hotels, the international airport, not to forget easy access to various parts of Mumbai are good reasons to attract the top brass and the well-heeled to shell out for an apartment of this size and scale.
“Our focus was creating Mumbai-centric projects and one that would assure immediate cash flows. We have been selective in land acquisition and preferred to build a residential project that the city would remember,” says Khetan. Back in 2007, when the Mumbai Metropolitan Region Development Authority (MMRDA) invited bids for its plots in BKC, Sunteck Realty was one of the few to bid for residential. The others who bid preferred to cite commercial projects. “We purchased the plot for Signature Island for approximately Rs 140 crore for two plots. And in 2009, we bid for the neighbouring two plots for approximately Rs 525 crore. A residential plot in BKC is extremely popular. The supply in BKC is limited,” Khetan adds.
Today, Signature Island commands a premium of 80-100% over competitors. And this is not merely because of the location but also the lifestyle that has been created and the gentry it has been able to bring in.
A Bachelors in Engineering and Communications from Mangalore University, Khetan, a first generation entrepreneur who founded the Sunteck Group in 2000, has worked hard in creating high luxury projects in non-trophy properties. Following a diverse and dynamic pathway to success, he gained valuable experience working in his family businesses of construction, finance and the service industry. Sunteck was initially started as a business centre concept. Khetan then signed up with a joint developer for a commercial project in Vile Parle, a suburban area in Mumbai, which is now the corporate office, Sunteck Centre. Bidding for residential projects came soon after.
Ask him on his penchant for creating luxe projects and Khetan is on home ground. “Much research has gone into creating the brand we have today. I have studied that in any business district, the residential segment always commands premium over commercial, whether it’s Manhattan, Hong Kong or Dubai Downtown. For that matter, consider Nariman Point in Mumbai where you have NCPA apartments and Cuffe Parade where Maker Towers and Maker Chambers where the residential commands a premium over commercial. So we thought of emulating this model at BKC,” he adds. Obviously, it took about 5-6 years to make this a reality. Khetan attributes his success to commitment, passion, and personal involvement. Patience, he says, was most important. “Our projects are thoroughly research based. The business is real. One has to take certain risks. It’s a calculated risk. I was putting everything on stake to get this (Signature Island) project done,” he adds.
Currently, Sunteck’s developmental activities cover the major metros and mini metros of India including Mumbai, Jaipur, Nagpur and Goa. The developer is planning to launch four new projects in Mumbai soon. Of the four projects, three are residential and one commercial project. Total revenues expected from the four projects are expected to be approximately Rs 1,000 crore.
In order to distinguish between the projects, the company designs, develops, and manages residential, commercial, and retail properties under the Signature (uber premium), Signia (premium), Sunteck (commercial), and Sunteck City (large format in the form of integrated townships) brand names. The aspirational residential segments fall under Signia, which involve properties like Signia Isles and Signia Pearl besides the projects coming up at Airoli and Borivali. The large format integrated townships under Sunteck City will be 23 acres in Goregaon besides the upcoming projects in Sion and Mulund.
Speaking about innovations, Khetan speaks about Sunteck City where it’s developing Phase I in Goregaon. The project, spread across 23 acres, includes six million sq-ft of mixed-used development to be launched in multiple phases. The developer has awarded Larsen & Toubro the construction contract on Avenue 1, which includes around 400 apartments. “If you see what we are trying to do in Goregaon, you will realise that over the years a lot of the back-offices of banks and financial institutions are based there. We saw an opportunity in terms of creating infrastructure and considering the area has already well-developed malls and schools, not to forget the connectivity. The property has also appreciated highly,” he says.
In keeping with its iconic association with luxury projects, the developer realised that every project need not have a ticket size of Rs 50 crore. “When we settled for Goregaon, residences there were available for up to Rs 4 crore, and very little for Rs 1.5 crore. We wanted to provide homes within a budget. It was also important that they walk to work. We tapped the market and gave them all the amenities of luxury and within the price of Rs 1.5-2 crore,” he says with a smile.
One of the reasons Sunteck Realty Ltd has found it easy to acquire land parcels is its access to cash. The company has also seen interest from major investors at a time when analysts are sceptical about the city’s realtors. A recent investor to join the list is Ajay Piramal Piramal who holds close to 5% stake in the company. Another investor, Kotak Realty Fund holds an 6.5% stake in Sunteck, while two others hold a minor stake. The company today is one of the premier listed real estate companies in India. It boasts of marquee names as its shareholders like US-based TIAA Cref and Ashish Dhawan (former MD of Chrys Capital). In the last five years, Sunteck Realty has done total sales of approx. Rs 3,000 crore alone. Most of this has been achieved without leveraging its balance sheet much, unlike several developers who are grappling with low sales and heavy debt. “Our focus on Mumbai-centric projects with immediate cash flows has helped. Also, we have been very selective in land acquisition and preferred private equity investments over debt,” says Khetan.
Simultaneously, the developer prefers to execute projects under joint ventures or joint development. “We have carefully chosen our joint venture partners. Piramal Sunteck Realty, a joint venture with Piramal Enterprises Ltd (promoted by the Ajay Piramal Group) focuses on high-end realty projects. Piramal Sunteck Realty along with another partner will also develop high-end and mixed-use properties in other places. Kotak Realty Fund came with 10% equity at the entry level. Today they hold 6.5%. They invested in our special purpose vehicle (SPV) level projects and we have given them a choice of multiple exits, besides good returns,” says Khetan.
Khetan prides himself on the fact that the company’s investor relationships have become stronger over the years. With a strong vision of sourcing funding at the right time and ensuring that it’s a good mix of debt and equity, the developer has managed to stay with secured borrowing of less than Rs 300 crore. Sunteck Realty has development portfolio of about 25 million sq-ft spread across 24 projects at various stages of development and four rented assets. Of those, it has acquired construction finance for only five projects. “We have always tried to use the right balance of equity and debt. We never shied away from considering pure equity and prefer not to go in for structured debt. Even when we borrowed debt, it has never been on a debt-equity ratio as this is not a manufacturing company. Real estate is all about cash flow. At times we have leveraged our balance sheet fully when we had to acquire land but we were conscious to bring down debt soon,” says Khetan.
What has worked in the developer’s favour is the habit of acquiring land banks with no title or acquisition problems. It prefers not to think of keeping the land idle waiting for it to appreciate. “We believe that the moment you buy land, one must create value out of it. If you have to outperform the market then you must offer something new. And there must be value addition to command a premium of 15-20%,” he adds.
Ask Khetan about affordable housing, the one sector that seems to be big in real estate, and he says, “We will not ignore anything that can add value. Our strength today is executing premium housing and staying city-centric. If we feel that affordable housing or redevelopment is required then we might get into it. But we prefer not to dilute the brand. One person wearing three different hats of affordable and luxury and redevelopment cannot deliver the same kind of product,” he says.