Godrej Properties

Set up in 1897, the Godrej Group has its roots in India's independence and Swadeshi movement [1]. Its founder, Ardeshir Godrej, a lawyer-turned-serial entrepreneur, failed with a few ventures before he found success with a locks business [2]. The group has since grown into one with annual revenue of about US$6 billion earned from consumer goods, real estate, appliances, agriculture and other areas, and it is still controlled by the Godrej family - one of the most eminent industrial families in India with admirable track record of treating minority shareholders fairly over the decades. That is why we have felt comfortable investing in several of their listed entities over the years, including its primary property vehicle Godrej Properties Limited ("GPL"), which was established in 1990 and listed in 2010. The group considers real estate as a key growth area among its businesses. GPL is the country's largest developer by number of homes sold in FY23. It has delivered close to 41 million sq ft of real estate since FY18, and it is developing landmark projects in 12 cities across India covering over 18.58 million sq m [3].

GPL's solid execution has led to the developer being ranked as the most trusted real estate brand in the 2019 Brand Trust report. This also reflects its reputation and how it stands out from its peers in overall quality. Its other advantages include an asset-light and capital efficient development model, and good access to capital with the lowest bank funding rates across the sector. The company appears to be at an inflection point with improving fundamentals, and we expect steadily improving presales, profitability and cash flows over the next few years.

More broadly, we view GPL as well positioned to benefit from the domestic real estate industry's up-cycle. The industry's longer-term outlook remains bright, supported by an aspirational population, rising urbanisation and incomes, and favourable regulatory changes. Aside from the reform of the Real Estate (Regulation and Development) Act in India, that has led to a more regulated industry and greater protection for home buyers, schemes like the Pradhan Mantri Awas Yojana and Rajiv Awas Yojana have incentivised developers to venture into the affordable housing segment, fostering accessibility and affordability for the population.

The developer is also a leader on the sustainability front. It has been included among the global sustainability leaders in the Dow Jones Sustainability Indices list and has been ranked no.1 globally for three consecutive years in 2020, 2021 and 2022 by the Global Real Estate Sustainability benchmark (GRESB). MSCI has also given an ESG rating of BB to GPL, citing its green building efforts. As of the third quarter of FY23-24, 96% of GPL's portfolio is certified under credible external green building rating systems like IGBC and GRIHA [3]. In addition, the company is water positive and carbon neutral for Scope 1 and Scope 2 greenhouse gas emissions, and it is strengthening its efforts to include Scope 3 emissions through its supplier engagement programme.

[1] Swadeshi movement - Wikipedia
[2] About Godrej Properties | Best Real Estate Companies in India
[3] Godrej Properties 3QFY2024 Results Presentation