Sarang Wadhawan, vice chairman & managing director, HDIL expects Mumbai's realty price to rise by 20 percent in the upcoming days as he expects a traction in the demand.
Also read: CBI to probe Tata Realty-Unitech land deal worth Rs 1700 cr
Speaking to CNBC-TV18, Wadhawan says the ticket size will be in the Rs 1.2-1.5 crore range.
Furthermore, Wadhawan aims to cut down the company debt by 25 percent to Rs 2300 crore by March next year and adds that the Maharashtra government's move to increase FSI on affordable housing is a big positive for the company.
Below is the edited transcript of Sarang Wadhawan's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: Explain this news flow to us, this increase in Floor Space Index (FSI) for the affordable housing segment. How much could your own saleable area increase because of this and what is the kind of opportunity that HDIL will get?
A: HDIL is one of the largest land bank owners in the Mumbai Metropolitan Region (MMR) region. This policy of affordable housing which has just come out two weeks back is aimed at providing free of cost affordable housing to the government in lieu of additional FSI.
This additional FSI has moved on from one to three. However, out of that component 2.25 goes towards the residential segment and 0.75 goes towards the affordable housing segment.
It is a big increase in the MMR region because most of the other undeveloped areas around Mumbai, they were lacking in FSI. There the FSI was restricted in those areas. It is a good policy for us primarily because a couple of our projects in Vasai, Virar where our component was about 50 million square feet of affordable housing will now move up to about 75 million square feet. It will be one of the largest affordable housing township projects in India.
It is a great policy now but as we go along if there are any further amendments you will have to wait and watch what the government does.
Latha: Can you explain this more in terms of rupees and in terms of percentage gain for you? If you have to give away 25 percent for affordable housing to the government then how much money do you make on say a Rs 100 crore investment?
A: Primarily if you look at it, the affordable housing area that we give to the government, the cost to us is the construction cost. So, if you are looking at anywhere between Rs 1200-1500 a square foot will be the cost of generating this entire 2.25 component of affordable housing.
We anyways used to get one FSI, we used to get 0.6 transfer of development rights (TDR) but now because the cost of TDR will not be involved, the total cost will move up a little bit but the component of sale will increase substantially. Vasai, Virar anyways nowadays is at about Rs 4500-5000 a square foot.
This project Planet HDIL which we are planning to launch maybe this year end will probably be about Rs 25000-30000 project.
Sonia: Can you also start selling the land that has higher FSI to other developers in the area and how much of a potential could that be?
A: We have over the years been selling FSI in Vasai, Virar. A lot of our FSI transactions have taken place in that area because we own some of the largest land banks out there. When the approvals from the environment ministry do come in which we are awaiting maybe in the next couple of months, when we do get that we will look at the FSI model as well primarily to get the cash flow moving, to get the construction on. I think the FSI model has worked for us earlier and continues to work for us.
HDIL stock price
On August 19, 2014, at 11:12 hrs Housing Development and Infrastructure was quoting at Rs 96.50, up Rs 1.95, or 2.06 percent. The 52-week high of the share was Rs 113.85 and the 52-week low was Rs 29.50.
The company's trailing 12-month (TTM) EPS was at Rs 6.70 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 14.4. The latest book value of the company is Rs 248.84 per share. At current value, the price-to-book value of the company is 0.39.
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