Anoop Kumar Mittal, Chairman and Managing Director, National Buildings Construction Corporation (NBCC), has set his sights on residential real estate. Traditionally, NBCC, which is under the administrative control of the Ministry of Urban Development, has been providing project management consultancy services for construction projects, civil infrastructure for power sector, and real estate development. Mittal, who recently took charge of the public-listed entity, said residential real estate is a possible revenue-earner, as no public sector enterprise has a pan-India presence. The company expects revenues from the real estate project to contribute about 30-35 per cent in the next three years. Speaking to Business Line , Mittal said the company has already acquired 150 acres as land bank.
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What are the areas that NBCC has a presence?
Basically, our model of operation is in three areas — Project Management Consultancy (PMC), real estate and engineering, procurement and construction (EPC). At present, the ratio of business is around 90 per cent in PMC, 7-8 per cent in real estate and the rest in EPC. Now, our thrust would be more on real estate with focus on public-private partnership. Recently, we purchased land in Delhi-NCR and Bhubaneshwar. Acquiring land bank and constructing residential and commercial property will be a key focus area. Also, we are targeting large value EPC contracts in power and steel sectors.
How many projects are up and running?
We have around 20 projects across the country, either under implementation or in the pipeline. My aim is to have at least one project in every State by the end of the next two years. At least 80 per cent of these projects will be residential, and the balance 20 per cent commercial. The residential project will encompass premium residences and also flats for the economically weaker sections.
There is a perception that NBCC housing projects are meant for only Government or PSU employees. Is this true?
There is no binding on us to sell entire projects to Government employees or PSUs. Although, when we started, the projects were largely for Government employees. But now it is open to anyone and everyone on a first-come first-served basis.
How many flats are you developing? Also, will NBCC-developed projects be cheaper than other private developments?
We are building approx 5,000 flats pan-India. Of course, we are not selling on discounted rates, but price will be cheaper than the private sector in the range of 5-7 per cent. However, it will vary from location to location. Also, we do not have any hidden charges. Unlike private developers who go for a margin up to 30 per cent, our margins are to the tune of 15-20 per cent. Our strength lies in construction, whereas private developers outsource the PMC and construction. We do sub-let construction, but undertake PMC and EPC ourselves. We also have in-house house engineering and architectural wing which are the other advantages. Private developers have to spend a good amount of money on advertisement which is usually 3-4 per cent of the total project cost. This we do not so it is a saving to us.
Coming to advertisement bit, there is a perception that the general public is not aware about your projects? Will you be undertaking heavy publicity in the coming quarters?
Unlike private builders, we do not publicise. We also do not publicise like Delhi Development Authority or Noida Authority or any local bodies. It is a general advertisement and information is always available on our Web site. But now, I have asked our Publicity Department to give publicity.
Which are the cities where you intend to commence operation?
Out of 5,000 flats that we are constructing, 80 per cent is in NCR. Also, we will soon start a project in Kochi. We also have plans for Chennai, Madurai and Bangalore. In the South, it is very difficult to purchase land, particularly in Tamil Nadu, because they do not advertise. So, we have to go for private negotiation or joint venture and this escalates the cost.
We are in discussion with the Goa Government to launch a project on a partnership basis. The State Government will provide land and we will construct houses. Certain number of houses will be for the Goa Government, the remaining we will keep .
Will the focus be largely on residential or will you be looking at commercial segment as well?
Our experience with commercial real estate was not too good. Recently, we completed a project in Delhi. We tried to sell but could not succeed. Therefore, commercial properties are on a slow mode. Compare this with residential projects — there are nearly 1,000 applications for 300 flats. Also, we have development projects in Delhi and Mumbai. These properties are mainly on Government land. Return in redevelopment projects is around 10 per cent and mind it volume of the project is large which is Rs 5,000-7,000 crore.
How will the project be funded?
Our net worth is around Rs 1,000 crore. It is a zero-debt company. We have negative working capital. Most of the clients pay 10-20 per cent as advance for a project which is why we have a negative working capital. Our net margin is around 7-8 per cent, and the contribution of real estate is around 20 per cent.
In PMC business, we get around 5-8 per cent charges, so its contribution in overall net margin would be 2-3 per cent.
Our additional profit is from the real estate business. We are targeting 30-35 per cent contribution of real estate business in total net margin during next three years.
Do you envisage any challenges?
The biggest challenge is to acquire land and that too, at a reasonable price. Thanks to private builders, there are manipulations in prices. That is why we are targeting sick public sector companies who have good land bank.
Since the effort of the Government is to help these companies revive on their own, they can generate substantial revenue though their land holding.