Real estate sector’s growth in tier-II cities is tremendous

Real estate sector has grown at a faster pace in the post COVID period. Moreover, regulations have led to formalisation of the sector to a large extent with established business houses entering this growing space. While real estate sector growth is majorly driven by top metro cities, tier-II and tier-III cities are fast catching up. In fact, many experts see growth of real estate sector to be higher in tier-II cities on the back of faster rate of wealth creation. Against this backdrop, many companies have entered the realty sector with significant focus on tier-II cities. Lohia Worldspace, the flagship real estate arm of Lohia Global, is one such real estate player with a significant focus on tier-II cities in Uttar Pradesh and other northern states. In a conversation with the BizzBuzz, Pyush Lohia, Director of Lohia Worldspace said that the company is going to launch its 3-5 projects in next one year. The company, which has earmarked Rs 1,000 crore for investment, has built up around 200 acres of land bank in recent years. As it grows, the company is eyeing around Rs 5,000 crore of top line in next three years.

How the idea of starting Lohia Worldspace came in? What was the motivation behind setting up the company when Lohia Global has interests across many sectors?

I came back from the US in 2007. I completed my graduation there. At that time, retail was booming. India had allowed FDI (Foreign Direct Investment) in retail. Many global retail giants started their operations in India. We felt that there was a gap in the market and as we are from a manufacturing background, we understand how retailers work, what are the pain areas and how the supply chain works. So, we started a new business- Lohia Warehouse through which we served the retailers. Even today, we remain a major supplier to all big retail chains like Walmart. We are supplying handicrafts under the brand name of ‘Designco’. We are supplying to major retail chains like Walmart, Metro Cash & Carry, Target and others. So, that was my first business engagement. I always have a passion for real estate. We were contemplating into entering into real estate business. Apparently, during 2012-20 period, when real estate industry was not doing good. This was primarily because there was a lot of uncertainty and there was no regulator. However, things changed gradually. Post 2016 when RERA- Real Estate (Regulation & Development) Act came in, regulations were streamlined. And we realised that it is going to be a great time to be in real estate. In 2020, we started building up land parcels across northern India. As we speak, we are a stage where we are going to launch our first project. In the next one year, we are planning to launch 4-5 projects.

Can you throw some details about the ongoing projects that the company is developing?

We have received RERA approval for a villa development project in Moradabad. It is being developed in a 10-acre land parcel. It will have 175 villas. Eventually, we want to do a project, which is replicable. So, all the tier-II towns of Uttar Pradesh like Muzaffarnagar, Aligarh, Moradabad and others. We want to develop projects where villas are available for around Rs 1 crore kind of price range, where the customer gets both a roof and land. As of now, we are taking expression on interest and the response has been phenomenal. The advantage with us is that we are headquartered in Delhi. We have land parcel in Delhi, Lucknow, which are prime properties. We would be developing those projects in next one year time. In fact, design works are already on and architects are working on five projects. So, Delhi, & Lucknow are also in our radar. However, our focus will be on tier-II and tier-III cities as not all developers are present there. Moreover, local real estate developers lack exposure. We have thought process that we should be on those markets where quality development is lacking. That will help us in creating a benchmark.

So, you are saying that the focus on Lohia Worldspace will remain on developing projects in tier-II and tier-III cities in northern India. Is that the right understanding? Can you give some perspective in this matter?

Currently, we are focussing on Uttar Pradesh as the core market. We want to enter into multiple markets within UP, which is a huge market. We are scouting for land parcels all across the state. The segment, which we are catering to, is also very big. Currently, we have accrued around 200 acres of land as part of our landbank. These are all very city-centric land parcels.

What is kind of investment planned for the real estate projects? Can you provide some numbers in this regard?

We have earmarked Rs 1,000 crore for deploying it in multiple real estate projects and related activities. We have started deploying a part of it in various projects. Things are shaping up well. As a group, we see real estate business becoming the core business in the coming years. We are very bullish as far as growth opportunities in the real estate business is concerned. As far as various verticals are concerned, we are planning to develop sports parks, villa development, plotted development, and also commercial spaces. So, we will be operating in most verticals of real estate sector.

Can you throw some light on the bank/NBFC financing part? How is the engagement with financial institutions?

We have sound relationship with banks and other financial institutions. We have already received project financing from the State Bank of India. One of the edges we have is we are coming from a corporate background. So, access to capital will not be an issue.

What are your expansion plans going ahead? How many new projects will be launched in the next three years? Can you give some view about targets in terms of top line going ahead?

In the next three years, we are targeting a top line of around Rs 5,000 crore. We see around a built space of around 2.5 million sq ft. Lohia Worldspace has a separate P&L. We are following a separate project basis structure. We are segregating teams and creating independent team structure. We have around 65 people and we are adding people as we grow. Currently, we are going to launch projects on our own land. As we grow and in the future, we may tap the co-development space. We know that land is the most critical element in the real estate space. That is the reason that we are building up land bank taking into account the cost structure.