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Rule bound


Pradeep Jain, founder-chairman, Parsvnath Developers, is committed to executing existing projects thus delighting his customers

By Mitalee Kurdekar

At a time when the real estate market is hanging on by a thread and most developers have taken a serious hit, prospects seem bleak. Hardly any new projects are being launched, and the ones that have been unveiled are not generating much interest among buyers, let alone sales. This would seem like an easy time to crumble under the mounting pressure. But there are those who rise to a challenge.
Pradeep Jain, founder-chairman, Parsvnath Developers Ltd (PDL), is one such person. In these adverse conditions, he is looking to tread a different path. Instead of focussing on the negative, Jain believes this is an opportunity for developers to consolidate the market by completing what’s already on their plate, thus winning back the trust of buyers, and laying down the foundation for a mature market.

Founded on diversity
“I did my education in Delhi and post that, in 1984, I started in the real estate business as a broker,” reminisces Jain. At a time when the real estate sector as a whole was unplanned, and few brokers in the country had a large presence – as opposed to multinational brokers today like JLL, CBRE, and others – Jain was a broker with leading developers and had 10 offices spread across the country.

“We formed the arm that helped developers to sell their products, we also sourced the land for them, got it sanctioned and then started contracting. That’s when we thought, why not start our own company,” recalls Jain. It was thus that he started the contracting business in 1990, while 1994 onwards, he branched out into developing land too. The company commenced operations from Moradabad, where they made the first shopping mall in the country. Although this was a new concept at the time, it helped play catalyst in transforming how the nation shopped. It propelled PDL into the big league.

“When we started the shopping mall in a Tier III city like Moradabad, way back in 1994, we received an overwhelming response. That’s because none of the planned developers had entered that town, and moreover, rather than earning any money of it, we earned a reputation,” Jain declares.

Until 1998, PDL had their fingers in every pie, doing all three together: broking, contracting and developing land, informs Jain. He finally gave up the broking business in 1998, to focus on contracting and development. However, he would only undertake contracting on a selective basis, like in the case of specific high-end government contracts or some unique projects for the Delhi Metro, the Central Government, and so on. Things took a dramatic turn in the year 2006, when the company applied for an IPO listing.

“We were the first real estate company to come out with an IPO, and were listed in 2006. The day we came out with the IPO, we owned around 120-130 million sq-ft of developable area, and were operating across all verticals,” Jain says.
When asked which achievement he is most proud of, Jain is thoughtful for a few seconds, but then finally admits that the mall in Moradabad is his first and therefore finest achievement, probably because that’s where it all started for PDL.

Rising innovation
From then until 2007-08, Jain claims to have introduced a number of novel ideas to the real estate sector. “We are known for introducing innovations in the real estate sector. Before 2006, I used to do work for Unitech, the Ansals and DLF, until we became a listed entity. Our market cap, the day we were listed, was more than a billion US dollars, and the day I filed the DRSP with SEBI, only a few real estate companies were listed, like Unitech and the Ansals. They had not come out with an IPO, but they were listed and their overall market cap equalled Rs 100 crore, while we managed to reach around Rs 1,100 crore through the IPO,” points out Jain.

Growth was steady and substantial after that, and a number of PDL projects mushroomed throughout the country. In fact, PDL is one of the few developers who have managed to carve a presence across the length and breadth of the nation, and currently operates in 42 cities across 15 different states. One of the ways in which they have been able to achieve this phenomenal growth is by keeping up with technology and innovation, while respecting market conditions and people’s expectations.
Over the years, the construction methodology used has changed dramatically. In 1994, Jain recounts how there were no hoists or cranes around to make things easier and faster. They have long since moved on, starting with steel plates and batching plants to, more recently, aluminium formwork. Prefab systems are also in play, now commonly visible in PDL’s high-end or, for that matter, most multi-storied projects.

“Gradually, we improved our construction system, but we are not yet at par with the international market. There’s a simple reason for that. Internationally, the cycle of a roof slab is three to seven days. We are not fit for that; our weather is not fit for that. Also, we can’t afford that cost. If you take the average rate across the country, it is Rs 4,500-5,000 per sq-ft, which includes the cost of land, cost of construction, cost of sanctions, cost of stamp duty and other charges, as well as the holding cost. In India, a project takes two-three years to get a sanction, and certain projects take five years to get a sanction. In addition, there is a holding cost too. So you lose on margin when you improve your technology and if you improve your technology, then your cost of construction dramatically increases. Only in certain projects, where the value per sq ft is high, we use those kinds of technological innovations,” laments Jain.

Similarly, when it comes to contracting construction activities, the company believes in doing both in-house as well as third party contracting. While 80% of construction is carried out in-house by a large professional team that uses their own shuttering instruments; on a selective basis, they also engage the likes of ILFS and L&T.

Big Delhi-very
Of all the markets that his company operates in, Jain feels that the Delhi/NCR area has remained on the path of growth throughout and will continue to do so. “We are a country of 1.2-1.3 billion people. Most of the population stays in the northern part of India. Since states like Uttar Pradesh, Haryana, Punjab, Jammu Kashmir and Uttaranchal are well connected to Delhi, people from these states move freely to Delhi/NCR. The growth or the size of the projects in Delhi/NCR, if you ask me, is seen nowhere else in the country. We can see a shopping mall of over a million sq-ft or a housing complex of five million sq-ft, or even a township of more than 1,000 acres. That kind of product is available only in North India, and particularly, in Delhi/NCR. Even Mumbai’s mega projects are restricted to the downtown area or sometimes the suburbs, in which case, they are still below a million sq-ft. The same situation is reflected in Bengaluru and Kolkata, whereas large developments are possible in Delhi/NCR,” professes Jain.

The company presently owns about 151 million sq-ft of developable land mass (including all the verticals), of which more than 60% lies in Delhi/NCR. Jain is currently focusing on completing all pending projects in the residential space. “Since the last couple of years, the sector is going through a tough time. All real estate projects, including ours, have been delayed. This has raised a lot of concerns including those from customers and institutions. In addition, sales across the overall sector are slow, therefore liquidity becomes a concern, and so also the mortgage rates. However, I feel that the government now understands; they are also coming out with solutions and will resolve some of the issues that are being faced. What we have now done is to hold back new launches, and instead fulfil our commitment to existing customers to convert the dissatisfaction of customers into satisfaction. So we are completely focused on execution. Once that is achieved, we want to plan future projects in a way that we complete them well within the timeframe proposed,” states Jain.

As of now, PDL has a total of 48 projects under construction, which cover 69.76 million sq-ft of land, and the portfolio includes everything from luxury commercial spaces, villas and high-rise apartments to affordable housing with the budget spanning the entire spectrum of demand.

Of these, La Tropicana in Delhi’s Civil Lines area happens to be a luxury development, spread over 16.8 acres, with over 78% of the area reserved for lawns, landscaped greens and water bodies. The first phase was recently offered for fit-outs.
Other big ticket projects include Exotica in Gurgaon as well as Exotica in Gaziabad, both introduced to offer lifestyle amenities with a work-life balance, owing to their location. Jain does not wish to alienate any client, thus has come up with options for every segment and budget. The Privilege in Greater Noida caters to the neo-rich class, whereas Palacia, also in Greater Noida, will capitalise on the rising development around the upcoming airport.

In the commercial space, PDL has big plans. Having completed the Parsvnath City Mall, Faridabad, he has recently built and handed over one phase of their premium downtown property in Connaught Place, the Red Fort Capital Parsvnath Towers. The project was constructed by L&T. Around 75% of the fully functional structure has been leased out to top companies such as SBI, Axis Bank, Aditya Birla Group, L’Oreal, Thomson Reuters, ICICI Prudential and so on.

In 2010, PDL had sold around 24% stake in this commercial venture to a private equity firm, Red Fort Capital, for Rs 120 crore. This year, PDL bought back this share, as well as that of Proprium Capital, for nearly Rs 500 crore in all, and now enjoys a 100% stake in its subsidiary Parsvnath Estate Developers, which is carrying out this development of approximately 3.25 lakh sq-ft. In fact, construction of Phase II is in full swing and nearing completion. Once completed, this will enable the project to have a consistent flow of revenue from leasing of the space, predicts Jain, adding that it is set to be “one of the best buildings not only in Delhi, but all of NCR”.

In an effort to keep up with moving times, PDL is also using online as a tool to reach out to customers. However, even today, people collect their information online and then come personally to buy the property.

Nation building
Apart from residential and commercial ventures, PDL has emerged as the first partner of choice for the commercial and retail estate development of 15 stations of the Delhi Metro Rail Corporation (DMRC) on a Build-Operate-Transfer (BOT) model. The company has delivered 11 projects, measuring 87,900 sq-mt of leasable area, wherein the concession period ranges between 12-30 years.

They also have affordable and mid-segment projects in the pipeline. “I feel that the affordable lies between Rs 20-75 lakhs, depending on the location. We operate in Tier II and Tier III cities, including Indore, Agra, Moradabad, Lucknow, etc., where we enjoy strong growth rates,” says Jain.

He is positive about the Government’s newly introduced affordable housing policy, under which some concessions, fast track approvals and quick sanctions will be afforded to the developer. “This is an engine of growth. Although certain state governments have introduced this policy, others are yet to do so. Also, the Government is talking about single window clearance in 30 days, but it is not happening on the ground,” he complains, stating that this is a major grouse for him and fellow developers.

Besides this, the Real Estate Regulatory Bill is a bone of contention, but for fairly genuine reasons. Jain says that while he welcomes the regulation, he believes that all stakeholders need to be made answerable, not just the developer. If government sanctions are not coming through or a customer defaults on payments, they need to be held responsible too is what he feels.

Despite this, Jain is marching on. Last year, he delivered 1,200 units, as opposed to about 1,000 units in the previous year. This year, he has set his team an ambitious target of more than 3,000 units to deliver. In all, PDL has delivered a total of 55 projects so far, which translates to 24.75 million sq-ft of developed area.

Given the huge land bank that they own, they do not wish to increase their debt. In fact, the company had a high debt in 2007-08, but has since been reducing it regularly. Jain explains that their net debt is to the tune of about Rs 1,350-1,400 crore, which is comfortable given the size of the company. The debt-equity ratio is around 0.55, and the balance sheet displays a long-term debt, hence there is no immediate pressure for repayment.

“We are focusing on the execution of projects. The money that will come to us from these will be more than enough. In the next couple of years, we wish to become a completely debt-free institution,” Jain concludes on a positive note.

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