Varun Gupta, Whole Time Director, Ashiana Housing Ltd., talks about March quarter results, demand situation, ongoing projects of the company and status of greenfield projects among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

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The revenues have increased notably in March quarter FY20 but the profits are still suffering. How do you see the results and what led to this increase in revenue but a decline in terms of profits?
Revenue went up because deliveries were good in this quarter. Profit reduced because we have taken some impairment impact in this quarter particularly about Rs 17.5 crore on impairment of accrued selling expenses. We have impaired an asset because of the future of some of those projects and assets that we have corresponding to it. Also, we have exited from a project in this quarter in Halol, which led to a write-off of around Rs 5 crore in the books. That had a very significant impact otherwise this quarter would have been profitable for the company. 

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Tell us something about the way in which demand is panning out. Are you seeing any changes in on the ground situation and what is your outlook on demand? 
I would like to answer this question in two parts:

1. I don’t know about the industry but last year was great for Ashiana in terms of bookings. We booked nearly 20 lakh square foot last year, which was nearly 80-85% higher than the year prior to that. So, we were seeing a demand revival for the company, if it is the correct way to put it. Going forward, I believe that the future will be great for the real estate due to certain regions like interest rates have reduced to a level in which the amount of EMIs that people will have to pay has reduced significantly. This has made real estate more affordable than what it was pre-COVID. There was an issue in the April quarter for the entire industry because of the ability to the transaction but the remaining nine months looks pleasant as EMIs has reduced.
  
2. Relative return in the real estate as compared to other financial assets like fixed deposits and stocks market. So, the relative attractiveness of the real estate has improved as compared to other assets. Thus, I feel that people will like to buy more real estate. 

What is the status of your ongoing projects considering the situation where construction has started in most of the states? Also, update us about the ongoing projects?
Construction work is on in all of our ongoing projects. We were fortunate enough to retain a lot of labour in a lot of projects. So, all of our projects have started construction and we are ramping up construction as we go. I think by the first week of August construction should hit the pre-COVID levels and planned levels.

I would like to know the status of your greenfield projects which account to a big chunk for your overall success.
Construction work has been started at the greenfield projects, which were launched last year and again by the first week of August we would hit the full momentum in construction. We already have 75-80% of pre-COVID levels. 

Are you identifying some new markets/ geographies in terms of areas where you think that good opportunities are available or you want to focus on the projects that you have in your hand at present and there are no plans related to expansion?
There are two expansions that the company is considering and they are (i) senior living projects, where we want to focus more as I think there is an increase in demand for senior living projects. So, we are searching for new locations for the purpose in existing locations and we are also searching for new projects. (ii) We also had a project in Pune which was signed long ago but we were not able to start work in Pune and I am hopeful that in this financial year, we should be able to get approvals and get that location going on for us.

Kindly thrown some light on the debt levels of the organisation and do you have any fundraising plans for expansion purposes?
Our debt levels have continued to be low and I think that we are at debt-equity of 0.15; I am not sure about the exact number right now. But the overall leverage is very low in our company and we believe that we can have access to money when it is required. On a net debt basis, there is no debt on us, we are cash-rich. So, we are well-positioned as a company in this environment. 

What us the inventory situation at present and how will you liquidate them? Many developers have launched several schemes and offer to push sales. What about Ashiana are you people offering some schemes or offers to the customers?
The most special scheme is that we do a great project and we do great service more than anything else. Our inventory levels in terms of ongoing projects, we are comfortable with the sale as compared to the ongoing construction. We had good sales last year as I have said. So, we are not worried about having stuck with a lot of work in progress inventory. We have some 6-7 lakh square foot built unsold inventory, which is ready to move and has been liquidating little slower than what we would like. In those inventories particularly in Bhiwadi, we have offered some schemes to sell and those schemes are doing well. But that is only and only restricted to Bhiwadi. Outside of Bhiwadi, all other locations where we are, like Jaipur, Jamshedpur, Chennai, things will only get better in those markets. And for us particularly, the quality of our projects that we offer is extremely value additive. Earlier the situation was that we need real estate in the proximity and with location but our projects are slightly away from the cities but the quality of life in those locations is very good. I believe that due to COVID people will look towards good projects and value of a good society instead of the value of the location. So, we don’t need to offer schemes. 

You are a big real estate player and getting feedbacks that better things will happen in the sector. With an eye on the economy and the way people have suffered in these three months, do you think that things can be pushed away and a pent-up kind of demand can be seen in the sector after some time? Don’t talk about the pre-COVID times, as real estate has been under pressure for a long time. Do you think that we can reach the levels where real estate was a few years ago when there was a boom in the sector?
The problem that the real estate has faced in the last 5-6 years was created due to less demand and oversupply. We as developers had built way too many homes in particular price points. And too many developers have also joined the business which was not sustainable that could have so many players in this sector with the size of the Indian economy in demand. Over the last 5-6 years, inventory across the cities and markets on an absolute level has reduced. Launches have also reduced and supply for the future has also got down. All those augurs very well for the real estate sector in general for an increase in price and health of the industry overall. I am quite hopeful that the future will be bright for residential houses.