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The Steady Rise of Pune's Kolte-Patil Developers
Pune developer Kolte-Patil fixed its house and made profits when most others are struggling. Now it has drawn up a plan to enter the top league
Image: Vikas Khot
Rajesh Patil moved his father’s business from Jalgaon, in Maharashtra, to Pune in search of challenges and market potential
Sujay Kalele remembers the scepticism when he made his first presentation to the Kolte-Patil board in early 2011. Shortly after taking over as chief executive in January 2011, Kalele had been tasked with setting the agenda for the next three years. He’d worked out the numbers and made a fair assessment of where the company would be. He felt there was very little room to go wrong. Still, when the 31-year-old presented the numbers, the reaction was one of disbelief.
Kolte-Patil, the Pune-based firm which has been in business for two decades, had seen its revenue halve to Rs 107 crore in the year ended March 2009. Kalele projected that by March 2013 they’d reach Rs 800 crore in sales. A stunned silence followed. People in the room wondered whether he was being a tad too optimistic. Remember, the memories of the Lehman Brothers bankruptcy and the drying up of demand for new office space was still fresh in their mind.
But as Kalele explains, “I knew that these were the projects we had to launch. Permissions were there. It was now up to us to execute and construct. Revenue would follow.” Sure enough, the company ended March 2013 with Rs 764 crore in sales and an impressive post-tax margin of 17 percent.
“Their delivery track record is impressive. They’ve taken timely steps and reached far,” says Shobhit Aggarwal, managing director, capital markets, at real estate services firm Jones Lang LaSalle.
It is from here that the company has set up an ambitious plan to grow and be counted among the top league of real estate developers in India. Sure, it doesn’t have the swagger of some of its Mumbai counterparts or the dependability that some Bangalore-based names are known for. But as the last three years have shown, timely delivery and right pricing is more important to building a sustainable business than large land banks. It’s a story that is just beginning to be taken note of by the markets. In the last year, the company’s stock has trebled from Rs 30 to Rs 90. It is also the first real estate company to announce a 45 percent payout of profit as dividend.
Recently, Kolte-Patil, which also has a presence in Bangalore, entered the Mumbai market with two society redevelopment projects. Here too its aim was simple: Margin expansion. The aim for the next three years is to double revenue to Rs 1,500 crore and have a presence in more markets. Not bad for a company which, just a decade ago, was doing just Rs 10 crore worth of business.
The Early Years
In 1989, when Rajesh Patil entered the business started by his father, he could have hardly imagined the many twists and turns it would take over the years. At that time the company would operate from Jalgaon in Maharashtra with a very simple business model: Buy land and build one-storey row houses. Cash flow from construction would pay for the land and once the project was complete, they’d move on to the next development.
Patil, finding the scale too small for his liking (plus, he says, as a civil engineer, the type of work was not challenging), moved the business to Pune, which held larger potential. Here he managed to work jointly with land owners and would move from project to project. This was in the early 1990s, and he says his family insisted that he wouldn’t over-leverage for land purchases or get into bed with politicians. As the company grew, Patil also realised that systems and processes were what would get them ahead.
Patil’s big break came in 2003 when real estate markets in India were poised for an upswing. The company’s saleable area (in Pune and Bangalore) increased to a million sq ft and his firm also got into IT Parks. During this heady phase for the realty sector, the company grew rapidly—there was an IPO in 2007—only to see sales fall by half in 2008. After this, Patil says the second phase began, which was one of consolidation and getting systems and processes in place. “We must admit we took our eyes off the ball,” says Patil.
The period after 2008 was cathartic for developers across the country. Earlier, land banks were seen as an asset. Now they were more of a liability due to the interest payments they sucked out. “Fortunately, we had never treated land as an asset but more as a raw material,” says Kalele. “This lessens the confusion in our mind.”
Kolte-Patil decided to become an organisation that was focussed on working capital. Each project was evaluated from this parameter and interest costs were kept as low as possible. It was here that the company decided to enter the Mumbai market. Now, one might think that this is a particularly difficult market to get into but one look at the numbers reveals why it is much better from a cash management point of view.
Mumbai is a city that has thousands of buildings that are in urgent need of being torn down and rebuilt. Members of the housing society select a developer who tears down the apartment block and reconstructs it. Existing owners get new and larger homes, while the developer gets houses to sell—a win-win for both.
Here Kolte-Patil looked at what it would cost to set up two similarly profitable projects. Take, for instance, developments in Pune and redevelopments in Mumbai, where the company makes a similar profit.
In Pune, the company sells at an average of Rs 4,000 a sq ft. Land costs are Rs 1,000 a sq ft and construction costs amount to Rs 2,000 a sq ft. That means profits come from the last 25 percent of flats sold. Now, assuming it takes Kolte-Patil 18 months to sell 75 percent of flats, its working capital is stuck for at least 18 months.
Contrast that with Mumbai, where Kolte-Patil has got into redevelopment projects: It has to pay housing society members to vacate so it can start construction. As a result, the capital blocked is a lot less. At times all the company has to do is sell a couple of houses in the development to make up for the money that is blocked.
Same profit with a much lower investment made getting into Mumbai a no-brainer.
Equally important to Kolte-Patil is affecting change in the organisation that allows the company to ride this growth. “I found that everyone was working in silos,” says Kalele. “This is not something that would allow us to grow rapidly. At some point we’d fall flat on our face,” he says.
For instance, marketing knew what flats they could sell but this is not something that was always communicated to the planning team. Discounts were ad hoc.
Kalele tied up with IBM to help prepare the company for the next phase of growth. As a first step, IBM is working on internal systems that allow Kolte-Patil to become more customer-centric, align sales teams to pricing, and get marketing teams on the same page as campaigns. Then there is the issue of managing cost. “A common issue with builders is that workers have arrived but material hasn’t,” says Clifford Patrao, executive director of strategy and transformation at IBM India. “How does one plan for the life cycle of a project? How does one look at synergies across projects?” These are some of the questions Kolte-Patil is working on.
As Kolte-Patil has gone from being primarily a family-run operation to a professional-managed company, there has been the inevitable parting of ways with the old guard. “Earlier, when someone would leave, I would feel very bad. But in a professionally managed setup departures are a part of life,” Patil rationalises.
Going forward, Patil says the company plans to continue to focus on execution. He’s confident that even in a slowing economy he can sell 2.5 million sq ft a year. The company has a land bank with a saleable area of 40 million sq. ft, which it will bring on-stream once approvals are in place. It has also launched a luxury brand, 24K.
One looming uncertainty, according to Patil, is the 2014 general election. In the absence of a pro-growth government, he says he may have to hold back launches. Still, his long-term aim is to reach Rs 5,000 crore in sales. Given the heady growth in the last three years, it’s hard to see why this won’t happen.
(This story appears in the 07 February, 2014 issue of Forbes India. To visit our Archives, click here.)
Comments 18
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AbaneetaMy personal experience with Kolte Patil has been marvellous. They are professional and I count them among a handful of developers who are NOT out to make a quick buck at the expense of investors.
on May 10, 2016 -
Amitish Patil
I had booked a flat at there Project in IV Aprtment in Feb 2011 with 7 lack as downpayment on 12th Floor. Even after 4 years, the building is still reached only upto 2nd floor. The construction is paused for the last three years. Builder is not willing to return the money. Also, when asked them to reallocate the paid amount to another project. They are asking tp pay 5 lakhs more, as the cost of new project has increased. My money is blocked. They have really cheated us. Kolte Patil developers can not be trusted for the deliverables.
on Feb 11, 2015 -
Vijaya
Worst company ever always keep false promises. Ever with employees also seems handicapped. Top Head just keep there mobile in silent mode never pick on time. Never get update holidays n site detail. Never ever think about kolte Patil.. Wortest company ever.
on Sep 10, 2014 -
Meenakshi Rajput
This is the worst developer I have ever come across. They will be at their best behavior till you make the entire payment and then no one is bothered about the registration and possession. Mr. Akshay Patil is our relationship manager who stopped answering our call after the payment was done, his number is 91 9049637000. Then somehow our registration was done due to the consistent effort from our broker. When we asked for possession, Mr. Pravin (I still do not know which dept. he is from) said he needs to check if any payment is due!! I guess he do not have common sense that if any payment was still due, how can we get our apartment registered!!! His contact number is 91 9765550804. Whenever you call him, he would say, \"I have to check in the system as our system is a new updated one\". To my surprise, we made the entire payment in Apr\'14 and it took 2 months for them to get our apartment registered and since those 2 months they were only updating their system!! An illiterate can also learn and start using a laptop within a week but these educated individuals still do not know (after extensive training of their new system) how to use their new system. We, still have not received any receipt of the entire payment done!! I never expected from a renowned builder such a service to their clients!!!!
on Jun 18, 2014 -
Vivek
NEVER INVEST WITH KOLTE PATIL. If you are looking for investing your hard earned money in property, I would recommend to go for any b-tier builder but a BIG NO for Kolte Patil builders. I have been cheated by this builder on delivery front. I blindly went ahead with their false reputation in market and invested in the Hinjewadi, Pune project in Dec 2011. I had to pay 100% of flat cost within one month of booking as they had the structure ready by that time. Once they got the money, they never turned back to customer as if we donated our money to them. Promise was made to give possession in Dec 2012 and now it is May 2014. I have been paying heavy EMIs as well as rent for last 2 years and yet do not have my flat. No amenities has even started which was promised initially. Site manager is asking to take the possession illegally so that they can be safe from all side. All in all, it seems my biggest mistake of life to trust on this builder and my strong recommendation not to go with such a fraud builder, if you want some peace of mind and security of your money.
on May 10, 2014 -
Sk Ambasta
KP never keeps delivery promises. They take legal help to deny facilities . I am a flat owner in bangalore,Floriana . We are suffering even after 12 years . They hire goons to trouble buyers. Please be aware , thankyou. SK Ambasta
on May 2, 2014 -
Vikas
I had heard about KP\'s bad reputation and in spite of my friends advising not to invest with KP\'s project, i went ahead due to excellent location. 1st shocker was KP use to ask for Slab money even before slab was built. I sent snaps to KP but they did not respond. They continued to ask for money earlier. KP\'s sales person said that in agreement KP have written \"On or Before completion of slab 999\" therefore we can take it before completion. 2nd shocker was they were asking for 100% money including 2 year maintenance about 15 months before they actually gave the possession. 3rd shocker, KP had promised PCMC water but gave tanker water to society at owners cost. They provided water purifier to tell how does it matter now. 4th shocker, they delayed possession by 15 months and they claimed it is Gov. delaying the possession and it is not KP\'s fault. They were never apologetic about it. Quality of flat was pathetic. Water is bathroom gets logged in one side and sunk is on other side. Flooring gets pressed if we stand on it and will break in few months. Many more but I can say they are the worst.
on Apr 28, 2014 -
Sohrab Saran
Unfortunately I have reason to believe that Kolte Patil\'s rise may not be so inspirational after all. In my experience and belief, they delay on their commitments to existing customers and instead invest their resources in purchase of additional land. Such appears to be the case for Green Olive apartments Hinjewadi where I booked my flat. The completion is delayed for more than a year and the amenities work is yet to start. The parking allocations are not transparent and the leakages caused by the plumbing have caused damp patch on wall that is not yet rectified. My suggestion is that Kolte Patil as a group should fulfill their commitments to existing customers rather than risk their reputation.
on Apr 28, 2014 -
Awanish
Kolte Patil developers cannot be trusted for anything they say. I booked a flat at their green olive project in December 2010 with the promise of completion by December 2012. The project got delayed by 15 months and they always kept saying this month during the entire period of delay. They promised me and my two other Friends who booked the flat there to give parking below the building as we were initial few to book the flats, now they are asking 1lakh extra for the same parking space or accept some covered space that they haven\'t even started to build. They don\'t even care to respond to emails and telephone calls once they have got the money. It\'s left upon clients to somehow catch them to get answers and their other dues. I never expected this from anyone as renowned as Kolte Patil.
on Apr 28, 2014 -
Sp
Unfortunately the story on one of Kolte Patil Projects \"Green Olive, Hinjewadi Pune\" is really grim. I purchased a flat in this project in 2011. Possession was promised in December 2012. We got possession in April 2014. Many things are pending. - Work on amenities (Podium Garden, Swimming pool) has not yet started. - Work on Podium parking is not started. - There is no Municipal Water - Construction quality is below standard. As many people rightly said in their comments, most dishonest builder in Pune.
on Apr 28, 2014 -
Devendra
Really surprised to see such an article. Bought a Kolte Patil apartment in 2000 in Bangalore, was supposed to get possession in 2001, after multiple delays got possession in 2004 with no amenities in place. Till date this society formation has not happened and basic amenities promised like club-house has not been built. Maintenance is extremely poor. Extremely unprofessional and no accountability from builders. Experience has been very bad and do not recommend anyone to buy apartment from them.
on Apr 26, 2014 -
Ajk
With so much of belief and trust in KP I had put all my saving till date to KP project to buy a flat. On top of that hefty emi. What I got is dishonesty and poor commitment. After buying the flat, I have been ignored like any thing. No responses. After all, my new dream house has, cracks and water leakages with very poor build quality. Despite suggestion of my few friends for not to go with KP, I made a wrong decision and now regretting it... LOST FAITH IN KP..... If KP listening to this.... \"Dear, its our life investment.... please don\'t do this.... Please take care of small projects too\"
on Apr 22, 2014 -
Abhi
KP is very dishonest builder. No commitment. On top of that the construction quality is very very poor. There is no communication channel between the builder and the customer. More than a year delay in project and that too not complete. No parking, No proper water arrangements, No amenities. They are looting hard money earned by people and cheating them. I wonder if KP cannot complete and show their dedication, their good build quality to small projects like mine... how can they will stand for the big projects they are talking about....
on Apr 22, 2014 -
Ram
Worst Experience.. How can someone post articles like this without talking to the owners who purchased flats. All projects are delayed. Is the Author paid by Kolte Patil to write an aritcle like this and their stock price rises up?
on Apr 22, 2014 -
Sandeep Jagtap
Kolte Patil is the most dishonest builder in Pune. None of its projects are complete-complete. Customers always has to compromise on their expectations in terms of quality of flat or amenities missing. They ask you to pay in cash for MSEB electricity meter rent before possession. Amazing!!!. I have 5 properties in Pune with different builders and Kolte Patil is worst of all. They would reach new low every time. Kolte-Patil needs to do introspection.
on Apr 22, 2014 -
Revanu Navadgi
Kolte-Patil in my experience is a very dishonest builder. They have delayed my project in Pune for over 15 months and keep lying about project completion. There is complete lack of commitment and customer attention. Even water supply is not available forget other amenities promised. Proper due diligence should be done before glorifying such builders - their rise is built upon customer deception.
on Apr 4, 2014 -
Litan
Not everything is hunky dory in Kolte-Patil http://ravikarandeekarsblog.blogspot.in/2014/01/Kolte-Patil-Developers-Ivy-Estate-Wagholi-Pune-India-Complaints.html
on Jan 29, 2014 -
Shanky Chawla
Working with such an organisation is like climbing on a stair Case of success.... Lucky to have a boss like Mr. Rajesh Patil.
on Jan 29, 2014
