The real estate sector was hit the most due to Prime Minister Narendra Modi's note ban decision last fiscal (FY2017) and this financial year, developers have to deal with the real estate regulation rules in addition to the upcoming GST implementation. Yet, the industry would like to be positive in its outlook this fiscal, says Nirupa Shankar, director of Brigade Hospitality Services Ltd (BHSL).
"FY2017 was pretty bad due to demonetisation, with many firms reporting sharp fall in business. We are hopeful that this year that things would look up," she told International Business Times, India edition.
BHSL is a wholly-owned subsidiary of Bengaluru-based real estate developer Brigade Enterprises Ltd. For the nine-month period ended December 2016, Brigade Enterprises reported 4 percent YoY drop in consolidated revenues to Rs 1,498 crore while net profit fell 23 percent to Rs 83.9 crore.
BHSL contributed 9 percent to the revenues and 5 percent to net profit. Its businesses comprise serviced apartments under the brand name Brigade Homestead, malls, convention centres, clubs, hotels and banquet halls.
However, the going may not be all that smooth, given that the sector has to deal with the Real Estate Regulation Act (RERA) that calls for compliance in many ways and the Goods and Services Tax (GST), likely to be implemented from July 1 this year.
Yet, she is confident of higher growth this fiscal. "We would hope for a minimum 25 percent growth in revenues."
On RERA, she said that her company is getting ready, given the challenges involved. "We definitely are taking steps to become RERA-compliant before we launch projects," she said, adding, "Teams are being constituted within the company to ensure full compliance."
The confidence of better days for the real estate sector also stems from forward movements in real estate investment trusts (REITs) floating IPOs, ensuring better cash inflows for the sector. "I know two-three companies have put in their applications. The success of the first REIT IPO will be crucial... pricing will make all the difference," she said.
A few weeks ago, there were reports that private equity player Blackstone is planning to list REITs around September this year, one for office assets and the other for retail properties.
A REIT is a mechanism that allows investors in real estate assets, akin to a mutual fund.
Brigade Enterprises had planned a capital expenditure (capex) worth Rs 1,080 crore over two-and-a-half years and has spent a substantial amount till now.
"In hospitality segment, estimated outlay is about 375 crores, out of which we have so far incurred 240 crores, balance 137 crores is there. Overall, CAPEX commitment about 1080 crores and we have spent 557 crores, balance 523 crores to be spent over a period of two to two-and-a-half years," the company said in a conference call held with analysts on February 6 this year.
Shares of Brigade Enterprises were trading 2.15 percent higher at Rs 249 apiece on the BSE at around 1.38 pm on Tuesday. The BSE Sensex was up 160 points at 30,482 led by Bharti Airtel, TCS, Dr Reddy's Labs.
