India's Godrej Properties sees rev rise 50 percent

MUMBAI Mon Sep 27, 2010 2:22pm EDT

Adi Godrej, chairman of Godrej Industries Ltd., poses for a picture at the Reuters India Investment Summit in Mumbai September 27, 2010. Indian developer Godrej Properties (GODR.BO) expects revenue to jump more than 50 percent this fiscal year as rising incomes boost demand for housing, the chairman of the $2.5 billion diversified group said on Monday. REUTERS/Stringer

Adi Godrej, chairman of Godrej Industries Ltd., poses for a picture at the Reuters India Investment Summit in Mumbai September 27, 2010. Indian developer Godrej Properties (GODR.BO) expects revenue to jump more than 50 percent this fiscal year as rising incomes boost demand for housing, the chairman of the $2.5 billion diversified group said on Monday.

Credit: Reuters/Stringer

MUMBAI (Reuters) - Indian developer Godrej Properties (GODR.BO) expects revenue to jump more than 50 percent this fiscal year as rising incomes boost demand for housing, the chairman of the $2.5 billion diversified group said on Monday.

Speaking at the Reuters India Investment Summit in Mumbai, Adi Godrej said the company, which is already developing 90 million square feet across India, would announce about five new projects this year in addition to five that have already been announced.

"Growth rates are very high, typically in 5 years we have grown at a compounded rate of exceeding 50 percent per annum. It will certainly be higher than that unless regulatory approvals come in the way," he said.

Regulatory hurdles, which usually delay or halt project growth in India, are unlikely to ease, Godrej said, adding regulatory responses in India should be "logical, reasonably long-term and should not be case-by-case."

The firm will raise some debt for projects financed this fiscal year, but plans to raise equity through a public offering in 18 to 24 months.

"For about a couple of years, we could raise more loans and still be comfortable with our debt-equity. After that, we may need to raise equity so our debt-equity ratio doesn't get out of hand," Godrej said.

Godrej also called for greater private-sector involvement in infrastructure projects, stressing the need for a regulatory body that was independent of the government.

With an economy growing at 8.5 percent and a fast-urbanizing population of 1.2 billion, the need to speed project approvals, implement new financing models and lure foreign investors is increasingly acute in India.

Still, Godrej was optimistic the Indian economy would grow more than 10 percent annually over the next decade, boosting demand and affordability, and making its real estate business the largest revenue contributor to the group in five years.

Godrej declined to provide details on the new projects, but said the firm would look at larger cities such as Nagpur in the western state of Maharashtra or Kanpur in the northern state of Uttar Pradesh, where it does not have a presence.

REDEVELOPMENT

The firm is also exploring one or two large redevelopment projects in Mumbai and hopes to finalize them this year.

Redevelopment projects are becoming increasingly common in major land-starved cities in India, where many buildings are in need of renovation. Residents are provided the means for temporary accommodation while builders raze the buildings to the ground, replacing them with new ones.

Builders are given incentives for redevelopment projects and often make money by creating more floors on the same land.

The pressing need for more housing in India's financial capital has had builders eyeing opportunities for redevelopment after a two-year market slump amid a global economic downturn.

"We are interested in redevelopment of a cluster of buildings. I expect there could be several such opportunities in Mumbai," Godrej said, refusing to give specific details.

Godrej said he hoped supply of "affordable housing" -- which the firm defines as accommodation that costs less than 2.5 million rupees or $50,000 -- would increase. He added that if prices continued to increase at current supply levels, the Indian residential market could head into a "bubble."

At 12.51 p.m., shares in Godrej Properties, which has risen about 36 percent since it listed earlier this year, were up 0.38 percent at 728.65 rupees in a firm Mumbai market.

(Editing by Jui Chakravorty)