Aditya Virwani.
Credit: LinkedIn/@Aditya Virwani
Bengaluru-headquartered real estate major, the Embassy Group, better known for its commercial offerings, is shifting gears in favour of residential realty development, company chief operating officer Aditya Virwani told DH in an exclusive interview.
“We will expand our residential portfolio in the next two years – aiming for a focus on commercial and residential in equal measure,” said Virwani. The office segment currently enjoys double the focus in the company's portfolio.
The realty player aims to launch at least four residential projects this fiscal, spanning a total of 5 million square feet. These projects are expected to collectively yield gross revenue of over Rs 3,000 crore, he said.
The brand is hedging its bets by pivoting towards the mid-premium housing segment despite smaller margins of 18-25 per cent as opposed to 30-40 per cent in the luxury segment. “That’s where we see the volume game,” Virwani said, adding the segment offers quicker completion cycles, lesser customisation requirements and a faster return on cash flow.
The company is also currently working on office projects spanning 10 million square feet in Bengaluru and Chennai. About 40-50 per cent of this is pre-leased, counting tenants such as ANZ Bank, Phillips, Alliance and Bain Consultancy, he said.
“Our fundamental plan is to continue building large-scale office business parks between 30 to 100-plus acres,” Virwani said, noting that global capability centres and IT companies want to be in a total business ecosystem. These buildings lease out faster and offer higher premiums, he added.
Moreover, he expressed a bullish outlook on the office segment’s growth in India amid recessionary trends elsewhere across the globe. “Cost pressures in the West mean more outsourcing and therefore they have to come to countries like India,” he reasoned.
While the company remains open to the idea, Virwani ruled out any projects in the warehousing and data centre categories in the short term. Highlighting the opportunity cost involved for developers in the warehousing segment, he said: “It involves a lot of work with 16-18 per cent margins, equivalent to that in a small office.”
Virwani also ruled out large-scale expansion in new geographies in the near term, both domestic and international. “In real estate the pulse of the market is a very local aspect,” he noted.
Elaborating on challenges in the Indian real estate sector, Virwani listed increased input costs in the last two years, high land prices, longer approval processes and lastly access to cheap capital.
Virwani pegged the company’s outstanding debt at Rs 8,800 crore. The Group aims to curtail the figure by 30 per cent in 2023 via select asset sales. They include an office park in Chennai, two land parcels in Bengaluru and lastly a tech park in Thiruvananthapuram.