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Construction kings of a new India
Sangeeta Singh & Priyanka Joshi | February 06, 2006
If you have to invest now, invest in property. For over a decade, this has been the common refrain of drawing room conversations. These topics most often lead to a debate about who to buy from, who's reliable, who has the best construction and who can get you the best deals.
Five years ago, names such as DLF, Unitech, Ansals, the Essel and Eros Groups would be dropped, at least in most north Indian homes.
Today new names have cropped up: Eldeco, Omaxe, Parsvnath, the Vatika Group, the Shipra Group, Aerens. While most of these relatively new companies have been in the business of construction for over 15 years, they came into prominence only in the last four or five years, thanks to the property boom.
This is especially true for Tier-II and satellite cities. In Jaipur, for instance, Omaxe is ready with its residential property, and the Vatika group is developing a Vatika Infotech City over 800 acres. In Sonepat, Parsvnath, Shipra and Omaxe are rubbing shoulders with property giants like the Ansals.
What is also making these primarily north India-based developers more popular are their aggressive plans to go beyond the NCR. Rohtas Goel, chairman and managing director, Omaxe construction, prefers to call Sonepat an "extended Delhi".
The availability of large tracts of land and lower prices compared to places like Gurgaon and Noida make these smaller cities attractive. "Availability of land, size and location have been factors in deciding what projects to develop. In Jaipur, we have been able to procure 808 acres, which has helped us develop a consolidated township, comprising residential, commercial and recreational centres and retail developrime ministerent," says Gaurav Bhalla, executive director, Vatika Group.
Bhalla says it makes economic sense to go beyond the NCR. "While in Gurgaon the average land prices range between Rs 30,000-55,000 per sq yd, prices in Jaipur start from Rs 7,000 and go up to Rs 40,000 per sq yd."
Also, Jaipur is coming up as an IT destination with Progeon and Genpact actively looking at spreading their call centre businesses. Vatika has taken its cue from Chandigarh, considered a pensioners' city till three years ago, but now booming industrially.
The Jaipur project will also give the group economies of scale, unlike its Gurgaon one. While the Vatika Infotech City will be a self-contained integrated township with shopping complexes, a 50-acre IT Park, five- and three-star hotels, a recreational centre, a health club, medical facilities and schools, the 53-acre Gurgaon project will have low-, mid- and high-rise blocs offering 1,400 apartments.
While Vatika's main focus is Gurgaon and Rajasthan, Parsvnath Developers has spread over most of north India. It is building 82 properties in 29 cities with a total cost of Rs 1,200 crore (Rs 12 billion) and is working on 17 integrated townships, 28 commercial complexes and multiplexes, six hotels and three IT parks.
With its first project on the Delhi-Moradabad road 15 years ago, Parsvnath chairman Pradeep Jain wants to go pan-India. "We want a presence from Kashmir to Kanyakumari," he says.
In south India, the company has properties in Kerala, Maharashtra and Karnataka. It will soon announce an IT park in the south, which will add to its existing two in Mohali and Gurgaon. Starting its first few projects from Saharanpur, Moradabad and Greater Noida, the company has been doing particularly well in the last three or four years.
"After handing over the Greater Noida Condominium, there has been no looking back. Now we have aggressive plans for the south," says Sunit Sachar, vice-president-marketing, Parsvnath Developers.
Again, Omaxe, after tasting success in its Greater Noida-based NRI City, which started two years back, is going the whole hog, developing integrated townships, malls, speciality malls such as wedding malls (Agra, Patiala and Gurgaon), apartments, group housing societies and so on. "The idea is to move people out of the concrete jungle, surrounded by open drains and garbage piles, and offer world-class standards," say Goel.
With an annual turnover of Rs 450 crore (Rs 4.50 billion) and profits before taxes (PBIT) of Rs 22 crore (Rs 220 million), Goel aims to close the current fiscal at Rs 750 crore (Rs 7.50 billion) with PBIT of over Rs 110 crore (Rs 1.10 billion) and 2006-07 at Rs 1,200 crore (Rs 12 billion) with PBIT in excess of Rs 200 crore (Rs 2 billion).
Omaxe's ongoing projects outside of NCR include Sonepat, Rohtak, Bahardurgarh, Amritsar, Indore and Raipur among others. "In the coming years I want Omaxe to be a household name across India," says the forty-something first-generation builder.
However, what Goel can't stop raving about is the NRI City in Greater Noida, which has been totally handed over and has appreciated four times from Rs 7,000 per sq yd to Rs 28,000 per sq yd in two years.
So, those who invested Rs 35 lakh (Rs 3.5 million) have already got an asking price of over Rs 1 crore (Rs 10 million). "I would say investors have got four times appreciation in one year, because the payment process was spread over a year," says Goel. For the future, Goel is eyeing Special Economic Zones and infrastructure projects.
While most of these builders are actively looking at Rajasthan, Haryana, UP and MP, the NCR region is far from saturated. Areas like Indirapuram in Ghaziabad, which was labeled "too far away", have been witnessing continuous growth, with the Shipra Group developing a sprawling township there.
Mohit Singh, managing director, Shipra Group, proudly says, "Today, we have smart people investing smartly. So real estate options have to match their aspirations."
According to him, youngsters demand a lifestyle that emulates global standards. For Singh, the challenge was to sell Indirapuram to the 'aspiring young' and get the region inhabitated. "The rest is history," muses Singh.
It could not take off eight-to-ten years back because of connectivity problems with Delhi, but Shipra's Indirapuram property is selling like hot cakes now. "The demand for new office spaces, residential complexes, shopping malls and SEZs made us to look for areas that can be shaped to accommodate the demands."
One look at Indirapuram, and you will understand Singh's point. Strategically placed close to Noida's IT hub, this area has undergone a sea change. The group has also built a multiplex -- Jam -- that houses some of the biggest retail brands.
The Shipra Sun City Indirampuram project has already given rise to 10,000 apartments and more are in the offing. The inhabitants are also rejoicing as their property prices have risen two-and-a-half times within two years.
Mohit Singh has now set his eyes on an IT Park in Noida and premium residential projects in Tier I and Tier II cities to maintain the group's 40 per cent growth rate. "We have done a few three-star hotels too but now will look at building five-star hotels," he says.
Yet another relatively new name, the Aerens Group has its hands full with residential projects in Gurgaon, like Aloha and Rishikesh. V Suresh, CEO, Aerens Gold Souk International, is naturally very upbeat. "Gurgaon is a shopper's paradise and with five-storey bazaars housing almost every international brand, along with multiplex cinemas, escalators and huge parking lots, the real estate potential is huge in terms of residential and commercial projects."
The Aloha is an ambitious project comprising 200 flats spread over 21,300 sq yds. "At Aloha, construction is just 20 per cent of the plot. The rest is for open green landscape and amusement and leisure arenas," says Suresh.
The group claims to have risen at 60 per cent and plans to launch projects in Tier II cities like Karnal, Ludhiana, Panipat, Sonepat and Faridabad. Suresh elaborates, "We expect a Delhi-like real estate boom in Tier II cities. Better road connectivity, newer public transport networks and dedicated business promotion zones will all help the property market," adds Suresh.
Every increase in the value of land are helping these developers cut comfortable margins for themselves. Suresh highlights the escalating prices in Gurgaon, "Five years back, the commercial property prices averaged between Rs 50 per sq ft and today it is Rs 200 per sq ft. On the residential side, the hike is slightly less but we expect prices to go up with better infrastructure connecting Gurgaon and Delhi," he says.
In the process of spreading their businesses these builders have also professionalised their activities considerably. Apart from being assisted by his younger brothers Sanjeev and Rajeev Jain, Pradeep Jain of Parsvnath has a whole lot of professionals, who also claim that there is considerable transparency in the organisation.
Again, Vatika's Anil Bhalla projects his company as a professionally managed one. While he is assisted by his two sons Gaurav and Gautam, there are over 200 professionals working for the group. At Eldeco, while SK Garg looks after the business in UP, he has transferred the brand in NCR to Pankaj Bajaj, who runs the business independently.
Burgeoning outsourcing activities, thriving IT and ITES industries and higher pay packets suggest that the boom in the construction industry is here to stay. With Gurgaon and Noida becoming IT and ITES outsourcing hubs, owning property there has become a status symbol.Trends show that buying a house has become a lifestyle statement. This will obviously translate into more business and geographical spread for this breed of property developers, who are in for the long haul.