Godrej Properties Limited (GODREJPROP) Q2 FY23 Earnings Concall Transcript

Godrej Properties Limited (NSE:GODREJPROP) Q2 FY23 Earnings Concall dated Nov. 09, 2022

Corporate Participants:

Mohit Malhotra — Managing Director & Chief Executive Officer

Rajendra Khetawat — Chief Financial Officer

Pirojsha Godrej — Executive Chairman

Gaurav Pandey — Managing Director and CEO Designate

Analysts:

Parikshit Kandpal — HDFC Securities — Analyst

Abhimanyu Kasliwal — Choice India Limited — Analyst

Puneet Gulati — HSBC — Analyst

Mohit Agarwal — IIFL — Analyst

Abhinav Sinha — Jefferies — Analyst

Pritesh Sheth — Motilal Oswal — Analyst

Manish Gandhi — KPMK Investments — Analyst

Parvez Qazi — Edelweiss Securities — Analyst

Kunal Lakhan — CLSA — Analyst

Sameer Baisiwala — Morgan Stanley — Analyst

Manoj — Geometric — Analyst

Ankit Patel — L&T Mutual Fund — Analyst

Mit Shah — CDR India — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Godrej Properties Limited. [Operator Instructions]

I now hand the conference over to Mr. Mit Shah of CDR India. Thank you, and over to you, Mr. Shah.

Mit Shah — CDR India — Analyst

Thank you. Good evening, everyone, and thank you for joining us on Godrej Property’s Q2 FY ’23 earnings conference call. We have with us Mr. Pirojsha Godrej, Executive Chairman; Mr. Mohit Malhotra, Managing Director and CEO; Mr. Gaurav Pandey, Managing Director and CEO Designate; and Mr. Rajendra Khetawat, CFO of the Company.

Before we begin, I’d like to point out that certain statements made in today’s call maybe forward-looking in nature, and a disclaimer to this effect has been included in the presentation shared with you earlier.

I’d like to invite Mr. Godrej to share his opening remarks. Thank you, and over to you, sir.

Pirojsha Godrej — Executive Chairman

Good evening, everyone. Thank you for joining us for Godrej Properties’ second quarter financial year 2023 conference call. I’ll begin by discussing the highlights of the quarter. We then look forward to taking your suggestions and questions.

While the global macroeconomic situation deteriorated in the second quarter, the Indian economy has continued to perform well and residential demand in India has remained strong. I’m happy to report the Company has reported its highest ever first half sales of INR4,929 crores with the sale of 4,710 homes comprising an area of 5.54 million square feet. This represents an year-on-year value growth of 60% and year-on-year volume growth of 26%.

During the second quarter, sales stood at INR2,409 crores with the sale of 2,410 homes with an area of 2.71 million square feet. While this is slightly below the corresponding quarter of the previous financial year, we believe this sets us up well for the year ahead and to achieve our guidance of INR10,000 crores. We have said that the second half will be exceptionally strong given the launches that we have planned, and that we will exceed INR10,000 crores booking value guidance for the year. We also focused on opportunities to take price increases across our portfolio, both to offset commodity price inflation and to aid in margin expansion.

On the operations front, while project completions were muted in this quarter, we remain on track to deliver a large number of projects in the second half of the financial year and expect deliveries this year to be well in excess of 10 million square feet. Due to limited project development in Q2, our revenue was moderate with INR327 crores, a year-on-year growth of 13%. Our adjusted EBITDA declined by 8% to INR98 crores, while net profit grew by 54% to INR55 crores. Net operating cash flow for the quarter were robust at INR721 crores. We made significant progress in several of our sustainability and ESG deliverables during the quarter, and our entire team was also proud to be recognized for the third consecutive year as the global leader in the ESG performance by the Global Real Estate Sustainability Benchmark.

From a development perspective, we added two new projects during the quarter, a luxury residential development near Carmichael Road in Mumbai with an estimated sales potential of approximately INR1,200 crores and a new project at Indiranagar Extension in Bangalore with an estimated sales potential of approximately INR750 crores. Post-Q2, we have added two new residential projects in Manor in Mumbai Metropolitan Region and in Mundhwa in Pune, with an estimated combined sales potential of INR2,500 crores.

For the financial year-to-date, we have added six new projects with an estimated sales potential of INR1,000 crores. Our business development pipeline is the strongest it has ever been, and we are confident of meeting our previous guidance of INR15,000 crores or more for future bookings from project added within the year.

Before I conclude my remarks, I’d like to mention that based on feedback and suggestions received from the investor community, we have improved our disclosures in the current quarter’s Investor Presentation. In the annexure of quarterly presentation, we have added details including accounting method, cumulative area launched, area sold, booking value achieved, collections received, and area delivered for each project.

We’ve also elaborated joint venture profitability by disclosing the interest income and development management fee income earned from joint venture projects during the quarter. We hope you will find these additional as useful and we look forward to receiving further feedback, so that we can continuously improve the quality of our investor communications.

On that note, I conclude my remarks. Thank you all for joining us. We would now be happy to discuss any questions, comments, or suggestions you may have.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.

Parikshit Kandpal — HDFC Securities — Analyst

Yeah. Hi, Pirojsha, congratulations on a decent quarter. So, my first question is on the business development pipeline. So historically, we have seen that the great years have been like two years back, we used to do about INR15,000 crores to INR16,000 crores. So this year, you seem to be confident of achieving it. So just wanted to understand, out of this, how much will be the MMR because that has been the weakest link in our business development pipeline. And also, if you can touch upon any developments on the Vikhroli, we can open up any new area during this year or next year on the Vikhroli land parcel?

Pirojsha Godrej — Executive Chairman

Hi, thanks for the question. Yeah, I think as I said, the pipeline, we are confident of getting to that INR15,000 crores number. I think a decent portion of that should come from Mumbai. We have I think fairly strong visibility of INR5,000 crores of booking value being locked in Mumbai, subject to deals closing as expected and we’re actually quite hopeful that we might be able to even exceed this INR15,000 crores number meaningfully. Vikhroli, any additions would not be included in this number, but we do expect a new phase launched in Vikhroli next year of about 1 million square feet.

Operator

Sorry to interrupt. Mr. Godrej, there is slight echo that’s coming from your line. May we request you to move the device little closer to you and if you could repeat the answer because participants may have not heard it.

Pirojsha Godrej — Executive Chairman

Sorry. Sorry about that. Am I clear now?

Operator

It’s a little better sir. Thank you.

Parikshit Kandpal — HDFC Securities — Analyst

Yeah, I could understand what you said Pirojsha. So you said that, you’ll try to exceed it at INR15,000 crores plus and INR5,000 crores might come in from Mumbai basically, right?

Pirojsha Godrej — Executive Chairman

Right, I won’t repeat it then. Thank you.

Parikshit Kandpal — HDFC Securities — Analyst

My second question is on some of the premium launches, high-ticket launches, especially the Worli side and Bandra and Ashok Vihar. So, any update on these three projects timeline. So how do we see the launches spanning out here. Any timelines here for these three projects?

Pirojsha Godrej — Executive Chairman

Yeah, so I think for Ashok Vihar, there has been reasonable progress, we are still awaiting final approval, but quite optimistic about launching that project in the fourth quarter. On Worli, we expect it to launch next financial year. And on Bandra, unfortunately, given the — given some of the issues, while there has been a little bit of the progress, I think we prefer to wait and watch till things proceed a little further before giving timeline guidance on that one.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And just lastly on the ROE guidance, which we have given sometime back about 20% to be achieved from ’23, ’24. So, any update there, so how do we see that happening now.

Pirojsha Godrej — Executive Chairman

I think the 20% was also on the smaller base of capital. We’ve done two QIPs. My sense is that from the capital raised in the QIPs, assuming sort of deployment takes a couple of years and then at least three years thereafter from an approvals and actual OC perspective, I think, it will take a little bit longer, but we do expect to see meaningful earnings momentum both in the second half of this financial year and next year and hopefully that will give the investor community confidence that we are heading in the right direction.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Sure sir. Thanks for answering my questions. Those were my questions. Thank you.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhimanyu Kasliwal from Choice India Limited. Please go ahead.

Abhimanyu Kasliwal — Choice India Limited — Analyst

Good evening, Pirojsha. Am I audible.

Pirojsha Godrej — Executive Chairman

Yes.

Abhimanyu Kasliwal — Choice India Limited — Analyst

Okay, thank you so much. So pleasure connecting with you sir. I just had a question regarding Vikhroli land and the DM portfolio. What kind of gross margins are we looking for the DM portfolio. That was my first question, sir. Secondly was, this quarter we seem to have recognized some tax benefit of INR50 crores, INR60 crores and I wanted to know how can we project this forecast just going forward. That would be very helpful sir.

Pirojsha Godrej — Executive Chairman

Yeah, on the Vikhroli land, I think the current arrangement is at 10% DM fee. Against that, we would have a couple of percent of marketing and sales costs, so the rest would be the margin, of course, with some overheads etc. also factored in. I’ll ask Rajendra to take the question on tax.

Rajendra Khetawat — Chief Financial Officer

Yeah. On the tax benefit part, I think, there was a DTA that got created. So this is — you cannot predict it. It all depend on how your tax planning happens. So this year, [Indecipherable] so we could trigger the DTAs. Hence, there is a tax positive, which has come in into the earnings.

Abhimanyu Kasliwal — Choice India Limited — Analyst

Okay. Another follow-up question. Regarding the Carmichael Road project, I mean it is going to be a very high margin project I understand. And we own it completely, almost 100%. So, are we looking at a more transition to high-value, high-margin projects or we are sticking to the mid-income range, which we have exceled in Bangalore and Pune? What would you say, sir?

Pirojsha Godrej — Executive Chairman

I think, certainly we will not be having most of our projects of the type of Carmichael Road. We’re very happy if we find the right opportunities at the right entry point to look at luxury projects being a small part of the portfolio. But certainly, I think the bulk of the focus will remain on sort of mid-income housing and we have though been trying to position the project more into premium housing bracket, where I think which even our projects — recent projects in Pune and Bangalore that you referenced, we would describe as a more premium than the mid-income housing and I think we’ve seen a good ability to both generate significant volumes and much higher margins at these kind of projects.

I’d say Vikhroli is an example of one such project, our upcoming project, Ashok Vihar is another one. So we have been focusing on trying to enter higher quality areas and therefore deliver projects at a slightly higher value and higher margins and we do think that will aid in delivering higher margin expansion over the coming years.

Abhimanyu Kasliwal — Choice India Limited — Analyst

Perfect. And one last. Sir, what margins can we — hypothetically, what would you give a ballpark for the next year or two, 30% EBITDA, 35%, what would you suggest, sir?

Pirojsha Godrej — Executive Chairman

Honestly, we don’t believe it’s appropriate to give margin guidance. I think there are a lot of points in this sector that can change. You are, obviously, selling at one point and then going through an entire construction cycle. If you need any evidence of the challenges of trying to provide forward-looking margin guidance and I think this year would be an ideal year to look at the kind of inflation that has happened.

So we, to be perfectly honest, are not comfortable giving margin guidance. That said, literally we are very confident in saying that the steps we have taken through business development in ensuring a higher share of profit in our projects accruing to Godrej Properties, by ensuring higher quality locations that are at higher price points and by some of the operational improvements we’ve made around digitization, procurement, how we’re handling sales and therefore marketing and sales costs, we do think all of these are directionally going to be very margin-accretive and we are confident again of those resulting in strong earnings growth over the next few years, but in terms of giving margin guidance, we prefer to avoid that.

Operator

Thank you. We’ll take our next question from the line of Puneet Gulati from HSBC. Please go ahead.

Puneet Gulati — HSBC — Analyst

Yeah, thank you so much for the opportunity. My first question is if you can give some color on what kind of demand are you seeing, are you seeing some bit of movement towards more investor-driven demand versus end user and how is the demand between the premium luxury to the middle-income segment, some qualitative comments would be helpful.

Pirojsha Godrej — Executive Chairman

Now, I request Gaurav. First, maybe I’ll take this opportunity to introduce Gaurav. As some of you would know, he is taking over from Mohit as MD and CEO in January of this year. So maybe, I’ll request Gaurav to take this question.

Gaurav Pandey — Managing Director and CEO Designate

Hi, thanks for the question. What we really — what’s very interesting right now is, we are seeing demand acceleration across segments. Of course, premium and luxury is seeing the maximum because it was kind of beaten down for the last two, three years, but it’s not really specific only to one segment. So, if you look at price segment of INR10,000 to INR12,000 per square feet, where we’ve already seen great traction, but at the same time even luxury project that we’ve done is seeing good traction. So it’s a very holistic price acceleration that we’re seeing and margin expansion is consistently happening.

Puneet Gulati — HSBC — Analyst

And between the micro-markets, any divergence in trends?

Gaurav Pandey — Managing Director and CEO Designate

So, one of the things we’ve noticed is that not just micro-markets, mass markets have tend to see price acceleration and we saw that trend almost a year-and-a-half back, but that trend is now kind of catching up across all geographies further, purely because there is a demand coming from end users and not just investors. So, yeah — so it’s not really specific to a micro-market in a city, it’s kind of quite prevalent across all the key cities where we operate.

Puneet Gulati — HSBC — Analyst

Okay. So demand across all segments, all micro-markets is that how — its a secular trend in terms…

Gaurav Pandey — Managing Director and CEO Designate

Yes. Yes.

Puneet Gulati — HSBC — Analyst

My second question is, if I look at the cash flows, there was a uptick in the operating inflows or the collections on a QonQ basis, while there was a downtick in the outflow. How should one read that, normally it should trend in same direction and in different magnitudes maybe?

Pirojsha Godrej — Executive Chairman

Yeah, Puneet, I think it is going to improve going from — as there are going to be more launches and more combination milestone reached, this cash flow will become stronger in the coming quarters. So, the trajectory is that, it is going to improve in the coming quarter. So, I think from period to period, for example, some of the construction incurred last quarter that resulted in milestone collections could happen this quarter, but I think directionally, obviously, operational investment that the Company increases will increase, but we do think operating cash flow, both gross and net level will see meaningful movement over the remaining end of the financial year and the couple of years ahead.

Puneet Gulati — HSBC — Analyst

Okay. Okay, that’s great. My last one is, on your land acquisitions. Would it be fair to assume that whatever land acquisitions that you concluded in the previous quarter have been all completely paid off or is there some element of deferred payment there as well?

Pirojsha Godrej — Executive Chairman

No, there are instances of deferred payments. For example, we mentioned when we acquired Ashok Vihar, one of the appealing points about the project was that the land payment was staggered over several years. So, for example, there, I think we’ve only a certain part of the land payment. Similarly, there would be other land payments that are still pending. In some cases, actually this quarter, we’ve actually made some land payments for new projects that we have not yet publicly disclosed because some of the condition precedence, we’d like to stay in place before those disclosures are brought down. So I think [Indecipherable] some amount of land payments that have been made for new projects that are not yet fully disclosed as well as pending payments for existing parcel.

Puneet Gulati — HSBC — Analyst

INR843 crores cash outflow for land includes something which you haven’t disclosed so far. Is that the right way to view it.

Pirojsha Godrej — Executive Chairman

That’s correct.

Puneet Gulati — HSBC — Analyst

That’s great. That’s all from my side. Thank you and all the best.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Thank you. Our next question is from the line of Mohit Agarwal from IIFL. Please go ahead.

Mohit Agarwal — IIFL — Analyst

Yeah, thanks for the opportunity. My first question is on business development. So we’ve seen last few deals have been all on the outright model. So, wanted to understand, have we kind of shunned the JV-JDA model largely or is it just a tactical approach and we are probably this time, we think that — so what are the merits that we see in an outright model versus the JV-JDA model based on the experience that you’ve had over the years because you’ve done JV-JDA earlier and now you’ve moved to outright.

Pirojsha Godrej — Executive Chairman

Yeah, I would not really say we’ve moved, right. I think we’ve certainly incorporated outright as a greater part of our overall business development strategy, but we’re still very much focused on doing joint ventures. I think the idea was to increase the economic share of projects that accrues to GPL and therefore the margins that we can generate from each unit of real estate that we sell.

I think I mentioned that our businesses development pipeline is probably the strongest it has ever been. I would say a large percentage of that is actually through joint venture project. So I would expect a significant number of joint venture that’s being announced in the second half of the financial year, in addition to a few more outright purchases. And the reason to sort of look at this economic interest increase is twofold. One, as I mentioned, to improve the share of the economics in the projects that accrued to Godrej Properties, but this is also something that we will have to tailor to the market environment that we’re in. We still feel that there are land opportunities at relatively attractive valuation, while leading developers across markets are doing very well. I think the broader sector is still in a liquidity crunch, and there are still good deals to be had.

We believe any deals done over the past 12 months or over the next 12 months are quite likely to be developed in a upward cycle of the market and therefore we’d be quite happy to lock-in outright deals, where all of that upside will accrue to us or joint ventures where a significant share of that upside will accrue to us. This may not always [Technical Issues] if in four or five years we feel the market is near a trough, if we feel that valuations are not very attractive, we may well prefer to look again at a more capital-like structure.

So, I don’t think that we should through the cycle look at business development through a single lens, but we will remain focused on both joint ventures and outright opportunities in the next few months and as I’ve mentioned, I think it’s more coincidence that the last three, four deals have all been outright. I fully expect some significant joint ventures to be announced over the next few months.

Mohit Agarwal — IIFL — Analyst

Sure. That’s helpful. And on the completions, for the first half, we have done less than a million square feet and you’ve reiterated a target of 10 million square feet. So, how is it going to be spread across the next two quarters and if you could give any estimate around what kind of revenue recommendation we can see for the next two quarters?

Pirojsha Godrej — Executive Chairman

Yeah, I think it’ll be Q4 heavy, but I think the pipeline is actually for even more than 10 million. So I think even if some things end up slipping out of Q4, we’re very confident with the full year number. We’ll be in excess of this 10 million, but its skewed more towards Q4 than Q3.

Operator

Thank you. [Operator Instructions] We’ll take our next question from the line of Abhinav Sinha from Jefferies. Please go ahead.

Abhinav Sinha — Jefferies — Analyst

Hi, good to see be higher disclosures, which are there. Now, there are about 45 plus million square feet of projects which are still under construction, not delivered. So is there a broad timeline? I mean, can we expect these to be delivered in, say, three years from now on?

Pirojsha Godrej — Executive Chairman

Yeah, I think any project under construction should be delivered within this financial year or the subsequent two financial years, unless there’s one or two things we just launched, but might go a little bit longer than that, but I think 90% plus of that certainly should be delivered in this next two and half years.

Abhinav Sinha — Jefferies — Analyst

Okay. And on the business development front, when you have been announcing these deals, which have been outright purchases, as percentage of the gross sales value, what is the likely land cost associated here?

Pirojsha Godrej — Executive Chairman

I think it varies quite a bit project by project and now obviously something like Carmichael Road can’t be compared to a mid-income project somewhere else. There would be a range. We can sort of take you through a project by project, perhaps, offline.

Abhinav Sinha — Jefferies — Analyst

But, if say 15% on average, is that a correct number to look at or it should be higher or lower?

Gaurav Pandey — Managing Director and CEO Designate

So, Abhinav, as Pirojsha said, obviously a city-centric deal obviously can be anywhere from 20% to 30%, but like in other markets, it will be somewhere in the range of 15% to 20% on a APR basis.

Abhinav Sinha — Jefferies — Analyst

Okay. So, that Pune one should be more like 15%, 20% right. Is that correct? Yeah. Okay. Sir also on the color on sales, have you seen any impact of the rising interest rates on, say, the lower or mid-income segment as compared to others or it’s still too early for that.

Pirojsha Godrej — Executive Chairman

Sorry, Abhinav, can you repeat your question?

Abhinav Sinha — Jefferies — Analyst

Yeah, on the demand front, have you seen any impact of rising mortgage rates on the affordable and mid-income component or the lower ticket size component of your sales, so far?

Pirojsha Godrej — Executive Chairman

No, not really Abhinav. I think we’ve had now enough time we think to see the impact of inflation and slightly higher prices as well as this increase in mortgage rate, demand looks to be holding up very well. We’re quite pleased that we’ve achieved nearly 50% of the full-year guidance in the first half. I think this quarter, it looks like it’s shaping up quite well and we’re optimistic that this will be one of our best-ever quarters from a booking value perspective. So as of now, there is no concern on demand anyway. And I think it’s important to keep in mind that while it’s true that compared to last year, mortgage rates have gone up by a couple hundred basis points to 8% to 8.5%, by any sort of the comparison of mortgage rates to 8.5% in India is quite affordable. If we look at the last time, the sector was booming around 2012 [Phonetic], mortgage rates in the double-digits, 10% to 11% then.

So if you look at affordability of residential real estate, I think, the story is still fairly intact. You’ve had almost no price increases for a seven, eight-year period, maybe a 10% increase over the last year, year and a half and mortgage rates have gone up, but gone up from all-time lows. So, actually if anything, I think, people are truly aware now that both pricing and interest rates, if anything, are likely to go up further to get off the fence and secure deals. But certainly in our own sales, we have not witnessed any source of concern as of now.

If anything, data is telling us that we need to be faster in our business development and regulatory approval process. One of the numbers we track internally track internally quite closely is unsold inventory as a percentage of launched inventory and that number is now at about 11% or 12%, which is a historical low for us. So, I don’t think sales, either from a volume or pricing perspective, is concerning right now and again a lot of the focus will be on bringing more inventory to market.

Abhinav Sinha — Jefferies — Analyst

Thanks, Pirojsha, for that.

Operator

Thank you.

Pirojsha Godrej — Executive Chairman

Thank you.

Operator

Our next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.

Pritesh Sheth — Motilal Oswal — Analyst

Hi, thanks for taking my question. Firstly on — a little bit of aggression into plotted development. So, we signed one project in Mumbai and we are building these inventory in, I mean, not so prominent markets, I mean Bangalore, Pune are still kind of plotted development market. So just if you can highlight the size of these markets and your confidence in terms of demand that can sustain for plotted development, that’s one.

Pirojsha Godrej — Executive Chairman

Yeah. I think plotted development is an attractive sub opportunity within residential. The advantages of it, of course, are that you can turnaround these projects very quickly given the limited development activities. So, your capital exposure from a timeline perspective is much lower, your IRRs can actually be significantly enhanced in this kind of development. So far, we’ve now had some experience with these projects. We’ve had successful project launches in Bangalore and Faridabad and Sonipat. So, I think we have a good sense of the demand, which seems to be quite strong and the return, which are also quite lucrative. So, we will continue to maintain the modest part of our overall business development activities.

Pritesh Sheth — Motilal Oswal — Analyst

And just a follow-up on that sir. Given it could be a highly competitive market because as you said turnaround could be [Indecipherable]. So what is the value addition that we are bringing in, in terms of project development — I mean plotted development, and we had a Sonipat plotted development launched this quarter, which seems to be like 20%, 25% sold out as of the end. So it’s just the timing of the launch, it happened quite at the end or that’s the response we’ve got overall for that project?

Pirojsha Godrej — Executive Chairman

I’ll request Gaurav to take this.

Gaurav Pandey — Managing Director and CEO Designate

Thanks. Coming first on the Sonipat specifically, we have seen a stellar kind of a record performance of that project. As you rightly said, it was launched towards the end of the quarter. So, the figure So, the figures that you are asking about 20%, 25% is only the portion of what was logged in and after that, we’re happy to share with you, kind of sold out the entire project at even close to about 30% over the underwriting price. So it’s been more of a massive success recently, and now the focus is towards completion of that project. And plotted in general, the first part of your question was the differentiation, right?

Pritesh Sheth — Motilal Oswal — Analyst

Yeah.

Gaurav Pandey — Managing Director and CEO Designate

What normally happens historically on the plotted project is that people have issues later on the title of the property and it’s not just about cutting and putting a gate outside it because that was the conventional way of doing plotted. And people used to have lot of challenges later on moving on. So if you go to our plotted developments, the value proposition that you get is, you get a decent [Indecipherable] growth, you get amazing infrastructure from storm water drainage systems, to electricity, to water pipelines and these are people who are finally looking at long-term staying in these homes.

So the quality of roads, infrastructure plays a very important significance and we bring a lot of competitive advantage purely because of the operating excellence we’ve got in the group housing projects. So that’s the USP that people tend to get. And, of course, with every plotted development, each project has a differentiation stand. Sometime it’s green trees, sometimes it is a massive club. So we are quite confident on robust sales going forward in the upcoming plotted projects as well.

Pritesh Sheth — Motilal Oswal — Analyst

Sure. And lastly, just one bookkeeping, the customer collections that’s in Slide 10 versus the actual gross collections that we report in the cash flow statement, just the difference between the two, if you can highlight?

Pirojsha Godrej — Executive Chairman

There is a maintenance and other item which we collect, so that’s the difference between the gross and the net. So, when we report in the cash flow, operating cash flow, everything is included and when we say the net collection, those are excluded from the collection part.

Pritesh Sheth — Motilal Oswal — Analyst

Got it.

Operator

Thank you. We will take our next question from the line of Manish Gandhi from KPMK Investments. Please go ahead.

Manish Gandhi — KPMK Investments — Analyst

Yeah, hi, good evening, and happy to see the disclosures, the extended disclosures. Pirojsha, first, I would like to ask about Godrej Living and what do you want to achieve through that?

Pirojsha Godrej — Executive Chairman

Thanks, Manish. I think any of you who haven’t heard about this, we’ve launched a 100% subsidiary of Godrej Properties called Godrej Living, which is going to be in the facility management vertical. Manish, there are couple of things we want to achieve from this. One is, we think one of the very important long-term value creators for Godrej Properties will be to ensure that our project post-delivery are maintained at a standard that is higher than is typical of the industry today and therefore, over the long term, people see value in being part of the Godrej Properties development. And we felt that having our own capabilities in this area was going to be important to deliver that long-term value creation.

Equally, as the scale of Godrej Properties increases and we think the opportunity will be to increase scale tremendously over the next several years and really several decades, we do think we will be creating a large base of housing societies and complete ones that are part of the Godrej Properties family and we think there will be a lot of opportunity to look at business value generation through these societies and through this business. So I think both long-term value creation to the core business of building and selling homes as well as an independent opportunity for value creation in this business, are the two things that we’re focused on with Godrej Living.

Manish Gandhi — KPMK Investments — Analyst

Right, wonderful, Pirojsha. My second question is on how is the demand shaping up in deals, really, but in two parts. So when you’re buying a land, say, about INR300 crores or INR500 crores in one side and other side is the joint venture. So do you see the demand scenario different in those things or it is — sorry, is the competition different in land side or on the JV side or how do you see the color?

Pirojsha Godrej — Executive Chairman

Manish, as I mentioned, I think the environment for business development we think is quite conducive. I think this will be hopefully a record year for business development overall, but very confident that we will actually see a lot of joint venture projects coming through over these next few months.

I suppose, if you mean big projects, there is somewhat less competition on the outright purchase side to get the number of developers who today could cross say INR500 crores or INR1,000 crores cheque, that number is still very limited, and probably two or three players in each market at most, but equally on significant side joint venture, landowners or smaller developers really are looking to partner with leading developers, which again brings the numbers down to a fairly limited number of players who can do this.

So overall, I do think what we have reported from a business development perspective over the last 12 months has been underwhelming, but extremely confident that we’re going to see very strong additions over these next few months.

Manish Gandhi — KPMK Investments — Analyst

Yeah, happy to hear that. And Pirojsha, just a short one, if I’m not mistaken, I think last quarter we spoke about two large deals in Mumbai, one purchase and one JV. So, do you see why your commentary that it is slipping to the next year or something like that.

Pirojsha Godrej — Executive Chairman

No, I think both of these are on track, Manish, so hopefully this quarter or next quarter at the latest, we can announce quarter growth.

Manish Gandhi — KPMK Investments — Analyst

Okay, thank you so much. Can I slip in one for Gaurav.

Pirojsha Godrej — Executive Chairman

Please.

Manish Gandhi — KPMK Investments — Analyst

Yeah, hi, Gaurav. Welcome. Just wanted your view on the same business development side on NCR, given the market in NCR with the volume and price rise, so market is very hot. So do you see it is different from other part or more competition to do deals in NCR?

Gaurav Pandey — Managing Director and CEO Designate

Thank you. It’s a fair question. At the movement, what we’re realizing is across markets, there is competition for good land parcels, right. The only advantage that we tend to get over some of our peers is our ability to structure a transaction, which is a win for GPL and for a landowner, especially the JV partners and for project. So, while the valuations are, of course, much higher than what it was, say, three years back in NCR, but the market has really move forward. So, we are quite competitive in offers to landowners. Very soon, hopefully, you will see, fingers crossed, a deal announcement in NCR as well.

Manish Gandhi — KPMK Investments — Analyst

Yeah, thank you so much. And all the best for the team and Gaurav also taking over. Yeah, thank you.

Gaurav Pandey — Managing Director and CEO Designate

Thank you so much for your kind wishes. Thank you so much.

Pirojsha Godrej — Executive Chairman

Thanks, Manish.

Operator

Thank you. Your question is from the line of Parvez Qazi from Edelweiss Securities. Please go ahead.

Parvez Qazi — Edelweiss Securities — Analyst

Hi, good evening, and thanks for taking my question. So, just wanted to get your views on price hikes. Did we take any price hike in Q2 and what was the quantum and also your views on the quantum of price hikes which can possibly happen in future going ahead, keeping in mind, obviously, the increase in mortgage rates.

Pirojsha Godrej — Executive Chairman

So, we managed to increase the price increase across our portfolio and depending on project to project, it’s been between 2% to say 5%. Incidentally, what is heartening to note that, unlike previous quarters when the cost inflation was very high, the previous quarter was quite good for us with the cost hike. So if this trend kind of continues, we might see positive upside in the next two to three quarters on the margin expansion as well.

Parvez Qazi — Edelweiss Securities — Analyst

Sure, thank you.

Operator

Thank you. Our next question is from the line of Kunal Lakhan from CLSA. Please go ahead.

Kunal Lakhan — CLSA — Analyst

Yeah, hi, good evening. So firstly, thanks for the additional disclosures. Just on the disclosures, so this share of value or booking value, I’m assuming this is for the entire project, not just our share, right?

Pirojsha Godrej — Executive Chairman

Correct.

Kunal Lakhan — CLSA — Analyst

Okay. Secondly, just trying to understand what will be the balance cost on these projects to complete them?

Pirojsha Godrej — Executive Chairman

So, different cost for different projects. So maybe we can take you through this offline, obviously, because it has all types of projects. Some are luxury, some are mid-income, but Kunal, just to jump in also, I think we did have a choice, we understand that some other developers are getting into giving a cost guidance and margin guidance. Our sense is, again, in our real estate sector that I think we’ve all seen multiple factors. These estimates can change and we don’t think that we’re actually adding value to the investor community by giving our own assessment of this at this time because as I was saying in earlier in my remarks, this year is a perfect year where you’ve seen the kind of volatility that can happen on the cost side.

So, I think there are senses that community knows what approximate costs are that hopefully the numbers we are giving is of quite detailed nature in terms of collections, booking value, scale of project, will allow a reasonable estimate of cost to be made.

Kunal Lakhan — CLSA — Analyst

Sure, sure. Thanks so much. My second question was on the outlay on land. How should we look at that in the second half, considering that we remain robust on adding more projects. We have spent about INR1,300 plus crores in the first half. So how should we look at this from the second half?

Pirojsha Godrej — Executive Chairman

Currently, we feel it will be quite considerably higher than the first half. As I mentioned, we are expecting a very, very strong period for new project addition, so cost investments to secure those will be commensurate. If you recall, when we raised the capital in our last QIP, I think the goal was always to fully deploy it in this kind of period. So we’re happy now that the opportunities are placed. So we have several advanced stage discussions that we’re quite hopeful will fructify over these next few months. So, hard to give a specific number, but certainly would expect it to be meaningfully higher than the first half.

Kunal Lakhan — CLSA — Analyst

Just a follow-up on that. Just in the long run, right, do we have some target in mind in terms of like the spend on land acquisition would be, say, in line with the operating cash flow or is there some metrics in mind that you have for the long term.

Pirojsha Godrej — Executive Chairman

Yeah. I think that’s fair. I think the idea is through the last QIP was to sort of reset the scale of the Company and I think if we’re able to do the kind of BD we think it’s possible this year and next year, that will be achieved and I think the scale then of operating cash flows will also be meaningfully larger and much more easily able to support strong growth from those levels.

Kunal Lakhan — CLSA — Analyst

Sure. That’s helpful. Thank you so much and all the best.

Pirojsha Godrej — Executive Chairman

Thanks, Kunal.

Operator

Thank you. Our next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Hi. Thank you so much and good evening, everyone. Pirojsha, if you are looking to deliver 10 million square feet in next about four or five months, is this something to worry about in terms of costs spiking up?

Pirojsha Godrej — Executive Chairman

Sorry, I didn’t quite catch that, sir. Yeah, [Indecipherable] put in cost escalation. So, I think we discussed a little bit on the last call also, I think it’s clearly overall what we would have hoped at the start of the year. I think the product mix for OC this year will have a negative cost impact due to the kind of escalations that happened here for some escalation etc. would be budgeted, but I think it certainly went beyond that.

For projects that have been launched recently, these costs have been more than passed on, and as Gaurav mentioned, I think some of this inflation tapering off will also significantly benefit projects up for OC in subsequent years. But yes, I think there is a little bit of cost pressure for projects where sales had happened, but construction delivery is due this year.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. That’s clear. And Pirojsha, the question that we get a lot is what if the mortgage — it’s fine so far, but what if the mortgage rates move 9%, 9.5%. Is that something that can spoil the party and this upswing in demand can slowdown?

Pirojsha Godrej — Executive Chairman

Yeah, Sameer, many things can stop the party. But I think as of now, visibility is that interest rates are actually quite comfortable levels by any historical standard. I think last year and before, in response, global governments undertook to combat COVID was really an exception. I think by any historic comparison, 8% to 8.5% mortgage rate is not that troubling. As I mentioned earlier also, purchasing real estate is not an entirely rational mathematical decision. There have been periods like 2017 [Phonetic] and early 2020 where affordability was excellent, but sales were very poor, because sentiment was poor and because people thought things would get even worse.

There have been periods in, say, 2007 where despite many years of prices sort of doubling over previous levels, demand remained robust. In 2012 demand was robust despite mortgage rates at 11%, 12%. So my sense is still it’s a relatively edges of the upcycle. More than mortgage rates, which I think another 100 basis points, I would imagine would not affect demand very significantly. Perhaps as we start going into double-digits, if in fact that happens, that you could see some effects on demand, but my sense is the much bigger factor will be how are people feeling about the Indian economy, is there confidence from a job security perspective and in all of those things, I think, India is really at relatively advantaged position at the moment and I expect this cycle to add more cycles, do have legs than last — for seven or eight years. But certainly, if there is anything we’ve learned over the last few years is, don’t discount the possibility of unexpected developments [Indecipherable] expectations.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, that’s very clear. And especially if I look at four key markets, you now have a quite a strong pipeline, 30 million, 40 million, 50 million square feet and there’s more coming. So beyond that, are you looking to expand outside of these four, Hyderabad and Chennai, especially?

Pirojsha Godrej — Executive Chairman

Hyderabad, we’re open to if we get the right opportunity. I think our preference is not to enter the markets in a very gradual way and do one or two projects. If we come in, we’d like to have clear visibility on a significant portfolio of projects. The clear focus though, Sameer, is to really deepen our presence in the markets we’re already in. We think we have single-digit share in each of these, lot of opportunities for expansion through business development and entering new micro market within each of these. So, while I think a Hyderabad entry is certainly something we’d like to see happen over the next couple of years, I’d say our far bigger priority is to further strengthen the presence in the four markets we’re already in, some of which where we’re only scratching on the surface of potential available.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great. Thank you so much.

Pirojsha Godrej — Executive Chairman

Thanks, Sameer.

Operator

Thank you. Our next question is from the line of Manoj from Geometric. Please go ahead.

Manoj — Geometric — Analyst

Congratulations sir on good pre-sale in first half and I think if Ashok Vihar is launched, I think you will be able to exceed guidance by a good margin and thank you for giving new disclosures also, it’s very helpful. So I was looking at one project in Noida, Godrej Woods. I think it has been constructed very fast as compared to the timeline you had given at the launch of the project. Is this across the four micro-markets or four markets, or is it a project which we have built more faster? Can you give some color on that?

Gaurav Pandey — Managing Director and CEO Designate

Thanks for the question. You’re referring to Godrej Woods. Yes, you’re right. It’s one of our most successful projects. On the construction timeline, I think as an organization, we took a very strong view on reducing timelines across geographies and we had piloted a series of projects. And if you see our historical amount of OCs that we tend to hit and while we’re seeing a massive jump is because of the same initiatives. So, yeah, this is one of those projects where there was focus and we’ve managed to create a exemplary quarter-on-quarter growth on the construction development and you would continue to see that not just in Noida project, but in other zones as well.

Manoj — Geometric — Analyst

Okay. So is this other developer also focusing in that or Godrej is taking a lead in this area.

Gaurav Pandey — Managing Director and CEO Designate

I’d say we are taking a lead, yeah.

Manoj — Geometric — Analyst

Okay, great. Thank you, and best of luck.

Gaurav Pandey — Managing Director and CEO Designate

Thanks.

Operator

Thank you. Our next question is from the line of Ankit Patel from L&T Mutual Fund. Please go ahead.

Ankit Patel — L&T Mutual Fund — Analyst

Hello?

Pirojsha Godrej — Executive Chairman

Yeah, Ankit, we can hear you.

Ankit Patel — L&T Mutual Fund — Analyst

Yeah, hi, thanks for taking my question. Just wanted to know, last quarter you mentioned the Bengaluru sales would be picking up in subsequent quarters. Based on what you’ve given now project wise also, it seems like the MMR and the Bengaluru projects, the bookings are not picking up the way the other projects are doing. So, if you could give some clarity on how this is progressing.

Pirojsha Godrej — Executive Chairman

I think I wouldn’t really agree with that. If you look at our best performing project during the quarter from a booking value perspective was actually Godrej Splendour in Bangalore where we sold almost INR400 crores inventory. It will, of course, take a little bit of time to rebuild the business development portfolio to the extent we’d like to see in Bangalore. We just also announced a new project addition during the quarter, but I think we feel very confident that in all four markets, visibility on new launches and business development is strong and will enable significant growth over current levels.

Ankit Patel — L&T Mutual Fund — Analyst

Okay. Now the Godrej Park Retreat, Bengaluru which has seen booking area pretty much lower than the first quarter, I was referring to that, actually.

Pirojsha Godrej — Executive Chairman

Each project, of course, will have its own dynamics and perhaps there was…

Ankit Patel — L&T Mutual Fund — Analyst

There’s no particularly issue which is based in these localities, right? That’s what I was trying to understand.

Pirojsha Godrej — Executive Chairman

No, no. No, not at all.

Ankit Patel — L&T Mutual Fund — Analyst

Okay, fine, Sure. Thanks. Thank you.

Pirojsha Godrej — Executive Chairman

Thanks, everyone.

Operator

Thank you, ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing questions — closing comments, I am sorry. Over to you, sir.

Pirojsha Godrej — Executive Chairman

I’d like to just say a quick thank you to Mohit, who has led the company a great success over the last five years. He allowed me and Gaurav to do most of the talking in this call, but then it’s an opportunity to say a big thank you to him, since this is the last time he’ll be joining this forum.

Mohit Malhotra — Managing Director & Chief Executive Officer

Thank you.

Pirojsha Godrej — Executive Chairman

I hope we’ve been able to answer all your questions, if you have any further questions or would like any additional information, we’d be happy to be of assistance. On behalf of the management, I once again thank you for taking the time to join us today.

Operator

[Operator Closing Remarks]