Ashok Chhajer-CMD Arihant Superstructures

How do you define the journey of Arihant since its inception in 1999?
We started as a localised developer of Navi Mumbai and then expanded our operations post the fall of the Lehmann Brothers and the resulting economic crisis made us to move away from the premium to the lower segment market in the outskirts. We therefore entered areas like Badlapur, Thane and Panvel on the outskirts of Mumbai where the demand is robust. One more step that we took this financial year is to reach out on a pan-India level. We now have an office in Jodhpur where we have bagged our first real estate project from the Government of Rajasthan as a PPP project for EWS and LIC Housing. We are building 1,350 houses at the rate of Rs 2.5 lakh per house, which the government has already allotted to the weaker section.

What kind of logistics and organisational problems did you face there?
We had to prepare a completely new base of recruits though in the initial stage we had transferred some of our staff from the head office. Now the systems and processes, including ERP, that are used in our head office are available there so that all the transactions pertaining to marketing, construction, engineering, legal, etc are in tune with the head office on a daily basis.

Which areas are you now considering for further expansion?
We do not partner with any of the local builders and hence it takes time to build a base in any city. We are, however, in the process of tapping new cities.

Do you believe it is better to have a land bank or work in a partnership model?
As of today we are comfortable with both the models. Given the real estate scenario, the project viability is given more importance.

How do you ensure that your projects are delivered on time?
In terms of engineering, we have filtered the criteria of selecting the contractors so that we work with the best. These criteria include financial as well as work experience and that is how we have managed to get a good team in Jodhpur where we have completed 21 buildings at the ground level and have reached the first level in just three and a half months. Everything is monitored on a daily basis by me.

How do you see rising inflation and interest rate impacting the real estate sector?
The rising interest rate will definitely suck out a lot of liquidity from the market. So that will definitely slow down the pace to a certain extent. Financially, it will pull down the holding capacity of the developers. That will lead to the selling of the finished products at lower rates, thereby decreasing the profitability.

What are the factors that helped you to post a good performance last year?
Being a cash-rich company was a plus point apart from good retail sales across the market. We could acquire 10 million sq feet constructable area in the last financial year and the fact that is has all been paid for is quite an achievement. The primary factor that helped was that we ventured into virgin areas where the bigger players were not present. Our confidence of catering to a segment not tapped earlier paid off rich dividends.

Could you elaborate about your current and future projects?
Today the company has projects at Panvel and Khargar which are almost 70 per cent through in the construction phase and will be completed in the first quarter of the next financial year. Construction will also start in the next quarter at Taloja, Badlapur and Panvel. In Jodhpur we have already started a project of 826 flats called Arihant Adita. New projects are expected to come up in the next financial year, including one at Panvel of 3,000 apartments. We will be building up to 10-15 million sq feet by acquiring in the last quarter of this financial year.

Do you plan to diversify into any other verticals?
We are not planning to diversify except carry out forward or backward integration related to our core activities.

How difficult is it for real estate firms to raise funds?
With the RBI and the banking sector having already raised the interest level, speculation in the market is now under control. Raising funds will be difficult for all those companies whose debt to equity ratio is stretched.

What are your plans of entering into Tier 2 and Tier 3 cities?
We will definitely be looking out for such opportunities but our approach is to proceed safely and cautiously. That is because we cannot leave our original base of Mumbai and our entrance to any other market will be more towards de-risking our business model.

What kind of risks and challenges lie ahead?
The major risks are related to the rising costs of materials and labour. Financially, most projects are pre-sold and thereby self-financed so that the risk factor is reduced. However, this hurts the margins. Such challenges can be mitigated by constructing at a fast pace and completing the projects before time.

What would be your thrust areas in this FY to achieve your targets?
We will be focusing on getting good contractors in our project implementation team.

What is your vision for the company?
I would like to see Arihant Superstructure get into an auto-pilot mode at least in a decade from today and run by professionals, processes and systems.

How are you creating value for your investors?
We have fire in our belly and our aim is to always do better. With our background in business, we work on models that are financially secure. Our aspirations combined with good business sense will undoubtedly benefit all our investors.