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Realty boom to be core driver for Godrej Group

The Godrej Group, traditionally identified with FMCG products, has decided to ride the realty boom.

india Updated: Dec 12, 2006 02:00 IST
Gurbir Singh
Gurbir Singh

The Godrej Group, traditionally identified with FMCG and consumer durable products, has decided to ride the realty boom, and make property development its core driver. Currently, property sales barely account for 7 per cent of the Rs 5,500 crore giant’s turnover. Looking forward, Group Chairman Adi Godrej expects realty development to become the Group’s largest revenue earner over the next five years.

“FMCG and durables is a Rs 5,000 crore industry. There is a limit to growth. On the other hand, the property sector in India is a Rs 300,000 crore market and the opportunities are limitless,” Adi Godrej said. “The FMCG business is currently growing 15 percent a year. Our property division’s sales are more-than-doubling annually,” he added.

Currently, with FMCG products accounting for 28 per cent and durables 20 per cent of the group’s turnover, the Godrej group is a dominantly consumer products giant.

The realty arm Godrej Properties contributes barely 7 per cent, while poultry and agro-products division Godrej Agrovet makes up 15 per cent. Godrej’s new restructured business plan now includes the unlocking of its vast land assets in Mumbai, principally the more-than 2,000 acres of land in its Vikhroli estate in Mumbai’s north east suburbs that had so far been embroiled in disputes involving the Urban Land Ceiling Act. “The Godrej brand will add more value to our realty products,” the group’s chairman said.

The pattern for land development at Vikhroli will be a joint venture between the land-holding companies Godrej Industries and Godrej & Boyce and the realty arm Godrej Properties. In Godrej Properties, 83 percent equity is held by Godrej Industries, while 13 per cent vests with the Godrej family. “We are looking at an IPO for Godrej Properties in the near future to give it a larger capital base,” Adi Godrej revealed. Much of the manufacturing activity at Vikhroli like soap production— under Godrej & Boyce—has been shifted to Himachal Pradesh freeing up three million square feet, while plans are underway to shift the remaining factory operations occupying 70 acres or so outside Mumbai too. In the old manufacturing area, several IT companies have taken up leased backend offices.

At the national level, Godrej is set to bring in other land holdings into property development. In Bangalore, 100 acres of land held by group company Godrej Agrovet for poultry breeding would now be diverted for realty development. Godrej Properties had initially taken the joint venture route with landowners.

By limiting its investment to development and construction and excluding land costs, Godrej Properties lowered risk on high-value lands. However, to ramp up realty development, the group had now decided to opt for an aggressive land acquisition strategy, Adi Godrej said.

Godrej Properties has bought 34 acres of land near Hyderabad from Rallis India for a consideration of Rs 57 crore. The company expects to develop a large six million square feet IT park, or alternatively an IT special economic zone (SEZ).

In Bangalore, the company is developing the old AMCO industrial unit into a residential complex with 3,000 apartments.

At Vikhroli, Godrej & Boyce has sought the state government’s exemption for the surplus land under the ULC Act for tourism and commercial activities. One plot in Vikhroli village is slated to have an IT park and a 3-star hotel and another near Hariyali will also have another IT park, said Prashant Marwade, architect for the project.

“We have 20 million square feet under development. Ask me after one year, and it will be 40 million square feet,” said Godrej.

(With Inputs from Madhurima Nandy)

First Published: Dec 12, 2006 02:00 IST