Brigade Enterprises has announced the launch of Plumeria at Brigade Meadows in Bangalore. The project offers two and three bedroom-hall-kitchen (BHK) homes. Speaking to CNBC-TV18, chief financial officer Suresh Kris says the company is likely to earn Rs 450-500 crore from the project over a period of 3-3.5 years.
Below is the verbatim transcript of the interview.
Reema: You have launched a new project called Plumeria. So, could you first give us the total size of the project, the timeline of completion as well as the other details like the realisations?
A: Brigade Plumeria is around 17 acres of plot size adjacent to the Brigade Meadows which is around 60 acres of land. We have already launched phase one which is around 30 acres and this we are doing it as a third phase because second phase Wisteria also we have launched. Plumeria total size is about 1.1 million square feet. This will be comprised of 2 BHK and 3 BHK, maybe around 40 percent 2 BHK and 60 percent 3 BHK. Price realisation is from Rs 4,000 onwards. Plus you have the PLC and floor raise like that. We have launched and we have very good response. As usual Brigade wants to sell over a period of three years which is what we wanted to give as a completion date. So, 36 – 42 months and this would be having more than 820 units. This is about the project Brigade Plumeria.
Nigel: If I got that right it was around 1.1 million sq feet that you are looking to sell?
A: 1.1 million sq feet over a period of 3-3.5 years we will sell. We will not sell immediately and because if there is any cost escalation or something we will be able to cover it up during the price increase. So, this is the policy of the company to sell over a period of the project life cycle. Maybe at the end of the project we may not have any unsold units. This is the policy of the company.
Nigel: So, at around Rs 4,000-5,000 per square feet this entire revenue that you will get from this project should be around Rs 550-600 crore?
A: It could be from Rs 450-500 crore is the total realisation which we are expecting from this, minimum. The ticket size ranges from about Rs 40 lakhs to Rs 65 lakhs wherein we have very good demand.
Reema: Even if you assume the upper end of what you are hoping to realise. At Rs 500 crore there would still imply a realisation of sub Rs 5,000 per sq feet and that would be lower than your blended realisation of about Rs 5,500 that you saw in the prior quarter of what you have seen over the last few quarters. Does that mean that you are now – maybe because of the market situation – the realisations have been coming down for companies like yours in Bangalore?
A: Normally the price also depends on the location. You cannot go and launch in the outskirts of Bangalore for Rs 8,000-10,000. If it is a city side what you are saying might be right. We are now seeing what is the margin and what is the price escalation during the project life cycle which could be around 10-12 percent per annum. Of course the average realisation would always base around the product mix. Of course this is at the mid segment or the lesser than the mid segment. Obviously it may go on low average realisation but when you go and launch some other project which may be around Rs 6,000 or 5,500 obviously the average realisation may go up.
Nigel: Could you give us some other details about another project that was announced earlier this month. You all were successful bidders for a joint development of a property at Whitefield, Bangalore what exactly are the other contours of this JV, when will this project be executed, what is your share in this JV?
A: You are talking about Brigade Cosmopolis which we have already launched during 2013 which is about 0.8 million square ft. The total developable area of that JV is around 1.6 million square feet. The JV is between Brigade as well as GIC, Singapore and we have also launched the second phase of about 0.2 million square ft recently and the sales are good and this will be expected to be completed by 2017. And the JV ratio is 51 percent for Brigade and 49 percent for GIC.
Reema: Some more details if you could tell us. In the prior quarter the company saw no revenue recognition. Which of your projects will come under revenue recognition in Q3 as well as what are the total launches that you are expecting in the second half of this fiscal year?
A: There are about 3-4 projects definitely which will come for the revenue recognition during this quarter apart from the existing projects. The revenue recognition could be significant based on the construction cost during this quarter which of course we will tell you after the results are over. Total revenue recognition will be on increased basis and we expect that around 30-35 percent is the minimum growth size for Brigade.
Nigel: We spoke a lot about your real estate segment of business. How is your hospitality as well as your lease rental business doing. That is around 25 percent approximately. Is it looking good or are you seeing some kind of pressure?
A: To answer the earlier question which I had not answered we are planning to launch around 5.3 million square ft which includes Plumeria. Out of which our share may be around 3.63 million square ft which would be during the second half, which is what we are expecting. Again lease business, we have about 1.63 million square ft of leasable space of which more than 1.5 million has been already leased out and hospitality business the occupancy rate is quite impressive for Brigade. We have two operating hotels with about 82 percent occupancy rate and about three hotels are under construction which will be operational in about two years time. Maybe two hotels in next year and again subsequently one hotel and as far as commercial we are still developing around 1.4 million square ft out of which our share may be around 0.9 million square ft which will come about 70 percent during the end of this financial year and the balance during the next year. So, this will add our total commercial portfolio close to around 2.5 million square ft next year.