Friday, March 4, 2011

Orbit Corporation

Q: What is your initial take on the budget for the real-estate sector? What are the positive implications?

A: The budget was more or less neutral; we didn’t see much happening in the real-estate space. Maintaining a steady position is good and hence, we didn’t see too many negatives. At the same time, as far as the housing loans are concerned, the Rs 20 lakh limit got extended to Rs 25 lakh. Few of the aspects have been made clear in the budget. The budget has been neutral as far as housing is concerned.

Q: Do you think that raising the housing loan limit for priority loans to Rs 25 lakh has any impact on the Mumbai developers?

A: It does not have much impact. In a city like Mumbai, anything at Rs 25 lakhs is only available in the far flung suburbs and it is affordable housing.

Q: One understands that volume in the Mumbai metropolitan region is slowing down – in the last quarter, just a 6% quarter-on-quarter fall and a 34% year-on-year fall, as far as the fourth calendar quarter was concerned. Does that worry you that sales are falling? Do you see any improvement in this quarter?

A: On the back of good supply, we are seeing absorption in commercial real-estate in the metropolitan region, which is positive. However, a lot of this absorption is in terms of the leases. Therefore the collections as far as the sales would not be attractive because the duty you have to pay is incremental amount.

As far as residential real-estate is concerned, the projects that are under construction and in one year delivery ready projects – there is excitement about them. However, a project where there is a visibility beyond two years in residential segment is absolutely dry. Hence, you have been seeing a drop in that particular segment it is with projects that are under construction with visibility beyond two years and hence they are insignificant in movement.

Q: Does it worry you in terms of the prices specifically in the residential space? The near-term visibility looks quite muted, and you have a couple of projects coming up as well. What is the outlook looking like?

A: About two quarters back, the view was that the prices would correct. However, we are also seeing that in the residential side projects that were announced and were to have commenced construction after getting their permits were stalled for some reason or the other.

The positioning of these projects was that delivery would take place within three to four years; however, I don’t see a large amount of delivery coming over the next three to four years. The delivery that was expected to take place of about Rs 2 crore sq. feet to Rs 3 crore sq. feet over the next three years is extended for the next five to six years.

Hence, I don’t think that the price points would correct much. However, we would start seeing the movement because like stock market, even real estate is sentiment driven. The sentiment is low right now but once liquidity comes back into the market, one or two quarters’ post monsoon, we will start seeing the uptick in volumes again.

Q: Can you give us what have been the sales at your end? In terms of sq. feet, how much could you sell in Q3 and Q4?

A: I don’t have the exact numbers, but we are selling well. As far as Orbit is concerned, we kind of stayed ahead from the market, and we have positioned ourselves in pricing our projects attractively and in premium location. So, our clients are happy to pick up the project durations that we have drawn out – of about four to six years.

We have projects more closer to completion in two to three years maximum. The sales have been decent if not exciting. Therefore, in terms of pure numbers, we would have sales of about Rs 100-150 crore in Q3 and another Rs 150 crore to Rs 200 crore in Q4 is what we think we should be able to achieve.

Q: What about the average prices quarter-on-quarter? The prices are up about 25% odd or so and they are expected to go up further. What is your outlook for prices?

A: I think prices will stay more or less where they are, they won’t move up or down.

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