Property price rise may moderate in 2024: Brigade's Pavitra Shankar

The Indian real estate sector had a robust 2023. However, some underlying issues exist, be it the tepid sales of affordable homes, rental woes in some markets, or a slowdown in office leasing by the IT sector in the country. Bengaluru-headquartered Brigade Group’s Managing Director Pavitra Shankar sat down with DH’s Shakshi Jain to discuss the opportunities and challenges before the realty market in India.

Edited excerpts.

How is Brigade looking to close 2023-24 and what is the overall investment planned for calendar year 2024?

We’re looking at a 15-20% year-on-year growth from a sales perspective, which doesn’t necessarily always translate into revenue because of the accounting guidelines. Overall collections as well are going to show a small growth over the previous year. In the next four quarters Brigade will be developing over 17 million square feet (msf), with an economic interest of 14.5 msf in all verticals. It will be at a total cost of Rs 8,700 crore, which will be spent over 3 to 4 years.

Elaborate on your expansion strategy, going forward.

In terms of markets we’re focused on South India. In Chennai we have added substantially to the land bank, so we have visibility of at least 12 msf for residential over the next few years. We are also looking at office space and if we find a great opportunity for retail, we are interested in that as well. Our strategy is that if we can expand to become the same size as we are in Bengaluru, in both Chennai and Hyderabad, that gives us more than enough growth that we need to show for the organisation.

Our core focus has always been residential, office, retail and hospitality. We’re exploring the warehousing and logistics side. We do have a 75 acre parcel in north Bengaluru, where we are exploring what would be the right mix. Warehousing is challenging based on the land costs. We also have a 25 acre allotment where we’re looking for a sanction for a data centre. But these are two new verticals and we’re going to experiment and see how it goes.

What is your outlook for the office market in 2024, in light of the leasing slowdown from technology based sectors?

We have not seen a change in the demand for space but maybe the type of tenant that is looking for space. Some of the larger firms may be looking at consolidating their presence, especially if they’re the typical IT staffing and IT services firms, but the global capability centres are expanding pretty dramatically. So there’s no sense of worry about reduction in the demand for space. So that still keeps us bullish in terms of developing offices in the right locations.

What in your opinion is the root cause and a probable solution to the demand-supply mismatch in Bengaluru’s rental housing market?

Older inventory has been cleared out of the market over the last few years, so there is minimal new supply coming in. Most of the demand in the last few years was from end users and not investors looking to rent out the apartments. This is a market cycle and will stabilise as new supply comes in over the next few years. The last two years have seen substantial increase in residential launches, which will result in completions in the short-to-medium term.

What is your annual expenditure on brokerage?

Across the portfolio it is sub 3.5%, while it is typical for many companies to be paying 5-6% or even more. We are still fairly conservative. We limit the channel partner involvement to 40-50% across the portfolio. If it’s a launch, you may see a higher involvement but as it goes into sustenance, it reduces. It is constantly evolving. In a good market we can stress more on direct marketing to have a contribution.

What are your expectations around pricing and construction costs in 2024?

I expect pricing to group, although may not continue to have such dramatic increases given the ramp up that has already happened. Given inflation seems stable, and price growth expected to increase, I see good appreciation in real
estate. Construction costs are also expected to increase moderately assuming no further shocks to the supply chain or heightened global political instability.