Abhishek Lodha: There's a fight for quality among developers

Property dealers who have delivered reliable products continue to have good demand in the market, says Lodha Group MD Abhishek Lodha

Published: May 12, 2015
Abhishek Lodha: There's a fight for quality among developers
Abhishek Lodha

Q. How long has it taken for Lodha to make an impact as a brand?
Abhishek Lodha:
It’s from the time we actively started thinking about the Lodha brand, developed it and established our identity in 2005-06. It took us a good five years before buyers were clear about what it stands for, what it offers, its positives and downsides. We have five core values that we stand by—product excellence, customer service, working ethically, serving the communities and working with the best people.

Q. How did the idea of the World One tower come about?
AL:
We did not start with a mission to build the world’s tallest residential building. We worked with Ian Payne, one of the finest architects in the world, and among the things that came up during our interaction was the decision that while developing such a large piece of land in central Mumbai—we had bought 18 acres there—we must avoid doing what other large developments or mill land had done—turned their back to the city. We wanted to ensure that the city feels involved in such a large development as it does not happen very often. Consequently, we went higher with the area that was available for development, ending up with one 117-storey building and two other fairly tall buildings.  

Q. What is your sense of the present state of the industry?
AL:
A lot of developers had sub-standard products prior to 2008. But since 2010-11, there has been a fight for quality. Developers who have showed credibility and consistency continue to have good demand in the market. This year, we will do sales of about Rs 8,000 crore, which is in line with what we did last year. Real estate is very closely tied to the overall economic cycle. People are still hopeful. We have a good leadership at the Centre; they are trying to get things done. The next 2-4 quarters will show how strongly this hope translates into on-ground demand.

Q. How crucial is the role of realty funds?
AL:
I think, in every evolving or evolved market, you need different levels of finance providers. You are going to need equity and you will need vulture funds, though you don’t really have many of those in India. Then, you have mezzanine funding by realty funds and plain vanilla debt. As a company, we like to work mostly with plain vanilla debt; it forms about 90 percent of our borrowing because it is the cheapest form of finance available to us. In certain cases, when we make large land acquisitions or situations which banks are not allowed to act in, we go for some of these realty funds.

Q. Some developers are raising money because they are not able to sell fast enough and it is giving them that lifeline. Do you agree with that?
AL:
Theoretically, if you sell everything, you don’t need any money, so I don’t know what “fast enough” means. You can make that statement about anybody who borrows, so by definition, your need for borrowing means that your need for finances is higher than what you are receiving in terms of cash flow.

(This story appears in the 15 May, 2015 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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