The Prestige boss flew to Mumbai with his nephew to take a look for himself. It was just a modest 300,000 sq ft society redevelopment project, but Razack liked it—he knew the value would more than compensate for the size, given that Mumbai was India’s most expensive real estate market. Even if the project backfired, there wasn’t much to lose.
Thereafter, one opportunity after another opened up for Prestige in Mumbai. In May 2022, it launched three projects in the city and today, Mumbai accounts for 15% of its sales (as of 2023-24). That share is set to become bigger this year with more launches on the anvil.
It may have taken him a while to get there but Razack has made a mark on India’s most competitive real estate market, home to industry giants such as Godrej Properties, Macrotech Developers (Lodha group), Hiranandani Group, and a slew of smaller outfits jostling for a piece of the lucrative pie.
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Now, after testing the waters with a mixed-use project, the Prestige boss is looking to conquer the Delhi-National Capital Region (NCR) with a set of housing projects. There Prestige will take on the might of DLF, India’s biggest developer by market capitalization, on its home turf. It’s not an arena for the faint-hearted; rather, it is a region where real estate developers are viewed with a high level of distrust after stalled projects left thousands of homebuyers in the lurch over the last decade. It is a market that has laid many aspirants low, such as the Jaypee Group and the erstwhile Amrapali Developers, and one that is synonymous with the demolition of Supertech’s twin towers in Noida.
Heading north isn’t the only thing on the agenda for Razack. Prestige Group has set itself an ambitious sales target of ₹25,000 crore for this fiscal year. It will launch a ₹5,000 crore qualified institutional placement (QIP). The group is rebuilding its office and shopping mall portfolio. And it will aim to monetize its hospitality assets, possibly through a public listing.
While achieving all of these goals may look like a tall order, the company has shown in the past that it can meet its targets. But is Prestige ready for this great leap forward?
A market on steroids
Prestige Group is part of an elite club of four publicly listed developers, with DLF, Godrej Properties and Macrotech. After clocking around ₹73,000 crore of residential sales bookings in 2023-24, a milestone for India’s real estate sector, the four companies are collectively targeting ₹88,000 crore of sales this year, with Prestige and Godrej together aiming for more than ₹50,000 crore of that figure.
The developers have good reason for this bullishness. After bouncing back during the covid pandemic, the housing market has shown no signs of fatigue. Indeed, in an 7 August note, rating agency Icra said that residential real estate players will continue to enjoy their dream run. Razack concurs. “Today, as soon as you launch a project, it gets sold. The appetite of homebuyers has continued. So, we just need to bring the projects to the market,” he said, in an interview with Mint. In Bengaluru, for instance, the developer has just around ₹400 crore of unsold inventory.
While they have set themselves ambitious targets, Prestige and its rivals did not have a first quarter to write home about because of the general election. The company’s sales bookings in the April-June quarter dropped to ₹3,030 crore from ₹3,914.7 crore in the first quarter last fiscal year due to delays in project approvals, which impacted launches. In order to scale Mt 25,000, it will need to increase the pace of its launches. During the first quarter, Prestige launched only a residential project and a plotted project in Bengaluru.
Over the course of the year, the developer plans to launch 28 residential projects, covering 73 million sq ft, across Bengaluru, Hyderabad, Mumbai, Delhi-NCR, Chennai and Goa. “We need to make sure we get the approvals for the new projects. Fortunately, we have a good launch pipeline. Once we launch, we are confident of selling,” said Razack. Indeed, notwithstanding the sluggish first quarter, home sales in India’s top seven cities are expected to witness double digit growth in 2024-25, said the Icra note.
Bespoke approach
Razack credits the company’s success in the housing market to its innovative product and pricing strategy. At a time when most developers are focused on high-end projects, Prestige has taken a tailored approach to buyers’ needs, understanding what an individual can afford and pricing property accordingly.
For instance, the company’s ‘Prestige City’ project in Hyderabad has a mix of one- and two-bedroom homes, small and large-format 3BHKs, and some 4 BHKs. “Post-covid, everyone said people want bigger homes, and started making large-sized apartments. At the Hyderabad airport, I see advertisements for projects with 7,000 sq. ft homes. That may create stress—how many people can buy a 7,000 sq. ft home?,” Razack wondered.
Anuj Puri, chairman of property advisory Anarock Group, said the company’s ability to deliver on its promise has instilled confidence among customers. “If we look at Prestige’s projects, the quality of facilities, infrastructure, compliance, timely delivery—all these have played a role in their continued growth. What they show on the project brochure is what they deliver,” he said.
While the residential segment remains the company’s biggest revenue earner today, each business vertical has been performing well. Prestige’s diversification strategy has also reduced its dependence on the Bengaluru market, but it could take time to yield results in the new markets it has entered because of stiff competition.
Cracking NCR housing
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The Delhi-NCR property market is not entirely new for the Prestige Group. It is currently developing a mixed-use project at Delhi’s Aerocity. The project will have two hotels under the ‘St Regis’ and ‘Marriott Marquis’ brands, 225,000 sq. ft of convention space, and 600,000 sq. ft of office space.
Prestige now wants to make it big as a residential developer in the market, which has bounced back since the pandemic ebbed. DLF dominates the Gurugram housing market in the premium and luxury segments, while Godrej Properties, which has launched a few projects in Gurugram, has a strong presence in Noida and Greater Noida.
Prestige has three upcoming launches: a niche, luxury project in Delhi’s KG Marg, a housing project in Noida, and a 62.5-acre township in Indirapuram Extension, Ghaziabad. While the Ghaziabad property has a projected gross development value of over ₹10,000 crore, the one on KG Marg could attract a price tag of ₹100,000 per sq. ft, as per broker estimates.
“We want to launch these projects first and get a feel of the market. We are fairly confident the projects will do well,” Razack told Mint. Beyond that, as is his wont, Razack is proceeding slowly. “Whenever I am looking at land in Gurugram, I tell people I have no compulsion to do a deal. I will only do it when it makes sense to me. So, we are conservative when we tie up properties. We will do a mix of outright buying and joint developments,” he said.
Whenever I am looking at land in Gurugram, I tell people I have no compulsion to do a deal.
— Irfan Razack
But given the major trust deficit among NCR homebuyers towards builders in the wake of past failures, Prestige will need to win customers over when it launches projects. Razack knows a thing or two about how to do that. When Prestige launched in Mumbai, it had flown a large number of brokers down to Bengaluru to show them the company’s projects. For a stuck project it had taken over in suburban Mulund, the company held a full-day session with customers to gain their trust.
“The speed and quality of construction, the way they harnessed brokers and generated sales, and positioned themselves in a new market, are commendable,” said Anarock’s Puri.
The company may rely on similar channel partner activation methods and buyer engagement in the NCR too. Prestige is also sending a few teams from Bengaluru to set up a base in the region.
Annuity push
Among the top four developers, Prestige and DLF are the only ones with a portfolio across real estate asset classes. Prestige is now making efforts to boost its annuity portfolio, which comprises commercial office, retail and hotel assets. After selling a large chunk of its office and retail assets to global asset manager Blackstone Group in 2021 for $1.6 billion, Prestige is rebuilding both portfolios.
The developer is building 12 new commercial office projects and has 10 malls coming up. In addition, Prestige, which has nine operational hotels and three ongoing hotel projects, plans to scale this up with 10 hotel properties across multiple cities.
In June, the company said its board has approved a plan to monetize the assets of its hospitality subsidiary, Prestige Hospitality Ventures Ltd, by issuing shares through the primary or secondary route, or both.
Funding is key
Funding will be critical for the top four developers as they pursue their massive growth plans. Prestige may launch a ₹5,000 crore qualified institutional placement (QIP), its largest, in August or September, said two people familiar with the plans. A QIP allows a listed company to raise capital from the domestic markets by issuing securities. It is also a barometer of investor confidence in a company’s prospects.
“The funds will be used for the retirement of debt, payments for land buys, and general corporate purposes,” said one of the persons cited above, who did not want to be named. “Once the QIP is done, they will move on to the monetization of the hospitality business assets, including a possible IPO (initial public offering),” said the person.
Prestige’s net debt had risen to ₹8,179 crore as of 30 June, from ₹7,780 crore at the end of the preceding quarter, on account of land acquisitions, said brokerage firm HDFC Securities said. The QIP will help it shore up its balance sheet.
Parikshit Kandpal, vice president of research at HDFC Securities, said the Prestige QIP would be one of the largest in recent times. “They want to buy land and grow further. In the current scenario, whoever raises money will gain market share in land buying, which will give them an edge in sales,” he said.
Despite Prestige’s debt inching up, with a number of projects getting launched during the second half of 2024-25, collection and surplus cash flows will aid in its reduction, the HDFC report noted.
In the current scenario, whoever raises money will gain market share in land buying, which will give them an edge in sales.
— Parikshit Kandpal
Over the years, Prestige has attracted many large institutional investors. In a recent deal, Abu Dhabi Investment Authority (ADIA) and Kotak AIF will invest ₹2,001 crore in Prestige’s four residential projects in Delhi, Mumbai, Bengaluru, and Goa.
Piyush Gupta, managing director, capital markets and investment services, at property advisory Colliers India, said fund-raising for land acquisitions is critical for top developers eyeing big growth. “There is a clear shift in how developers are raising funds through private financing and tapping public markets through QIPs to buy land, or pay for project approvals. Good developers such as Prestige and others have enough opportunities to tap funding and grow, compared to less governed developers,” he said.
Succession planning
On 1 August, during Prestige Group’s post-earnings call, Razack told analysts that the opening remarks would be made by Zayd Noaman, executive director at the CMD’s office. Zayd will play a bigger role in the company from here on. He is the son of Noaman Razack, a whole-time director and the CMD’s brother.
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While it went public in 2010, Prestige is still very much a family-owned business, with the promoters holding over 65%. The company traces its origins to the late 1950s, to a time when it had nothing to do with real estate. Razack’s father had an apparel shop in Bengaluru’s Commercial Street and the focus back then was on men’s clothing. But by the 1980s, the family had entered the real estate business with Razack leading the charge along with his siblings Rezwan and Noaman.
Prestige started out with commercial office projects in Bengaluru, and got into the residential side a few years later. Its first housing project, ‘Prestige Oakwood’, in the posh Koramangala locality, had apartments selling at ₹450-500 per sq ft in 1988—the going rate in the locality is now between ₹14,000-19,000 per sq. ft.
Today, Zayd and a new crop of family members are getting ready to succeed their elders. The company has reorganized its senior management after the resignation of chief executive Venkat K. Narayana in May. Narayana had worked at Prestige for nearly two decades, most prominently as its chief financial officer, and later, as CEO.
Zayd and a new crop of family members are getting ready to succeed their elders. The company has reorganized its senior management after the resignation of chief executive Venkat K. Narayana in May.
Post the reorganisation, the team is a mix of experienced executives and fresh members, with new business heads being appointed for each vertical and geography that Prestige operates in.
HDFC’s Kandpal said that as of now, the company’s ambition sales target for 2024-25 looks achievable. There are big launches planned this year, and Prestige has a record of selling out when it launches, he pointed out.
“They do a lot of market research before launching, and customize home sizes and prices for different locations. They are more flexible in their product mix which is why they get high sales numbers,” he said.
Razack is more measured in his expectations. “We would be foolish not to ride this wave, but we will do it cautiously. I do believe that the best is yet to come. Real estate sounds very glamorous, but it’s a tough job. We have to sweat it out,” he said.
