Bengaluru/Mumbai: Lodha Developers Pvt. Ltd has set up a commercial business vertical that will steadily build a portfolio of leased assets—office, retail and logistics—and aims to have assets under management of $1 billion by 2021, said a top executive.
Mumbai-based Lodha, the country’s largest real estate developer in terms of residential sales, is building the new portfolio, under which a 150-acre warehousing and logistics park is being developed near Mumbai.
“Lodha Group is now laying additional focus on commercial business and aggressively building its lease assets portfolio and aims to become one of India’s largest players in the next five years," said managing director Abhishek Lodha.
“As GST gets implemented, warehousing will be determined by the efficiency of the operations as compared to the location. I don’t think Mumbai has many efficient warehousing and logistics hubs," Lodha said.
In addition, the firm is also planning to build around 9 million sq. ft of office space and a million sq. ft of retail space under the new vertical.
According to property advisory CBRE, demand for warehousing space remained strong in 2016 with more than 10 million sq. ft. of space leased across top cities.
Companies from the engineering and manufacturing sector and e-commerce leased 22% of the total space transacted last year.
“As the warehousing sector moves towards a more systematic mode of operation, the sector is likely to witness the inflow of more institutional funding and formal sources of capital. As national players with larger warehouses emerge, deployment of capital in these fewer, better quality assets is likely to become easier," the CBRE note said.
On residential front, Lodha plans to double its launches in 2017-18 from four project launches last year, which included its first in London. The project has done sales of over Rs1,000 crore in nine months, a spokesperson said.
In May, it will formally launch its Grosvenor Square project in London, once the show flat is ready. Lodha had bought the iconic MacDonald House property from the Canadian government for over £300 million in 2013 and has already done select pre-launch sales at over £6,000 per sq. ft (Rs5 lakh per sq. ft).
The company’s net sales in 2016-17 was between Rs8,300-8,500 crore as compared to Rs6,500 crore clocked in 2015-16.
Net sales grew by 30%, where India contributed 10% (around Rs6,900 crore) and London contributed 20%.
Despite a temporary dry spell owing to demonetization, Lodha clocked sales of over Rs1,200 crore in March 2017, its strongest monthly sales performance ever, surpassing its earlier benchmark of Rs800 crore in February.
“Both the London projects have done about £160 million of sales. The revenue potential of the two projects is around £1.5 billion," Lodha said.
Lodha’s net debt is at around Rs1,500 crore but debt reduction will happen 2018-19 onwards, when projects mature and cash flows pay off debt, Lodha said. London project sales, which have been strong, will help in debt reduction as well.
“We will focus on the reduction of the cost of debt. Our business cycle matures 2018-19 and 2019-20 and that’s when cash flow from the projects will pay off the debt, and reduction will happen. We just got out of the investment phase last year. So this year we have to sort of start reaping the investments," he said.