Ashiana Housing Ltd
NSE:ASHIANA
Ashiana Housing Ltd
NSE:ASHIANA
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Earnings Call Transcript
Other Earnings Calls
Ladies and gentlemen, good day, and welcome to the Ashiana Housing Q4 FY '22 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you. And over to you, sir.
Yes. Hi, thanks. Good afternoon, everyone. Welcome to Ashiana Housing Q4 FY '22 Earnings Call hosted by Dolat Capital. We have the senior management of Ashiana Housing with us today. Mr. Varun Gupta, Whole Time Director; and Mr. Vikash Dugar, CFO.
Now I will hand over the call to Mr. Vikash Dugar for his opening remarks. Thank you. And over to you, sir.
Thank you, Rahul.
Good afternoon, everyone. I hope all of you and your families are keeping healthy. I welcome you all to discuss the performance of the fourth quarter and the year ended March '22 for Ashiana Housing. Thank you for joining us today. The year gone by was exciting in terms of new acquisitions. We saw a healthy momentum in housing demand and hence explore various areas where we can execute further to meet the future demand. Since new land parcels have been acquired in the year, first being Gurgaon, where we are planning another Kid Centric Homes in an approximate 22.1 acres, second being in Pune, a senior living project in Varale in a 11.93 acres; third in Jaipur, 8.6 acres, a regular comfort homes; another in Jamshedpur 3.96 acres; and lastly 2 land parcels in Chennai of 15.64 and 9.93 acre range, both being senior level projects. Total potential saleable area in these new parcels will be around 61 lakh square foot. And with this, we also see senior living share increasing in our portfolio in future years.
Area booked recorded in FY '22 was 14.76 lakh square foot as compared to 14.97 lakh square foot in FY '21. In the last quarter, that is Q4 FY '22, 4.53 lakh square foot of area was booked as compared to 4.21 lakh square foot in Q3 FY '22. In Q4, bookings were driven by Ashiana Amantaran Phase 3, which was launched in Q4, Nirmay Phase 4, Bhiwadi; Ashiana Anmol Phase 2, Gurgaon and Ashiana Shubham Phase 4 in Chennai. Value of area booked increased to INR 573.25 crores this year vis-a-vis INR 534.68 crores in FY '21. Sales price improved to INR 3,883 per square foot in FY '22 versus INR 3,571 per square feet in FY '21, driven by increasing prices across projects and changing mix towards higher-priced projects. We handed over 8.86 lakhs square foot in FY '22. This was against a delivery of 8.55 lakh square feet in FY '21.
Total revenue declined to INR 233.59 crores in FY '22 versus INR 259.31 crores in FY '21 due to lower deliveries. TCI also declined to negative INR 6.56 crores in FY '22 vis-a-vis positive INR 4.08 crores in FY '21. There was an additional impact of provision of INR 4.26 crores for the misappropriation of funds incident discovered during the year. Quarterly total revenue increased to INR 78.28 crores in Q4 FY '22 versus INR 54.19 crores in Q3 FY '22 due to higher deliveries. TCI also improved to positive INR 9.22 crores in Q4 FY '22 versus negative INR 3.28 crores in Q3 FY '22.
Pretax operating cash flows was positive at INR 165.05 crores in FY '22 vis-a-vis positive INR 171.65 crores in FY '21. It remained positive in all the 4 quarters of the year. Equivalent area constructed was at 16.2 lakhs square foot in FY '22 versus 11.66 lakh square foot in FY '21. Quarterly equivalent area constructed was at 5.07 lakh square foot in Q4 FY '22 versus 3.73 lakh square feet in the previous quarter. And the same was 3.90 lakh square feet in Q4 FY '21.
On this note, I would like to conclude my remarks. We will now be happy to discuss any questions or suggestions that you may have. Thank you.
[Operator Instructions] The first question is from the line of Rohit Balakrishnan from ithought PMS.
So just wanted to understand in terms of FY '23, what's the outlook in terms of launches, what are we planning? And what are we trying to target in terms of presales, et cetera. So could you just share some outlook?
Rohit, Varun here. So I think this year is an important year for us. We have lots of -- we picked up a lot of projects last year, and we had a couple of pending projects to launch this year. So this year is exciting. We are looking to launch a few projects, greenfield new projects. So I think overall launches, overall put together, phases that will be launched will be about 25 to 30 lakh square foot this year. Of those, I think half -- about 12 or lakh square foot would be new phases of existing projects. And another 15 to 20 lakh square foot would be launches of the first phase of new greenfield projects that we are looking at.
We are looking at a large improvement in presales, particularly on the revenue side, driven by increasing prices and change in product mix. So I think the company is looking at crossing about the INR 1,000 crore mark and we're looking at a INR 1,100 crore presale number this year as compared to INR 573 crores that we did in FY '22. So I think that's the internal targets. They are a little stretched, but I think right now, the environment is very positive, and we have inventory this time.
Right. So just, sir, on this point, as you said, it would be the highest ever that you would have sold. This INR 1,100 crores, I mean, so this would be largely -- I mean, out of all the launches that you're planning, would Gurgaon be a significant part of that and out of this INR 1,100 crores, would that be a big contributor? Would that be a fair...
There would be 3 or 4 old projects would be a large contributor even in Ashiana and more the older project of Ashiana -- of Gurgaon in Sohna. That will also be a big contributor. We have seen good sales last year in that, and we expect further improvement in sales value there as well.
The new phase that you have launched there, right?
So the new project has not been launched. The new project will be launched and will be of a high contribution in the financial year '23 and Ashiana Anmol in Gurgaon, the older project, that will continue to do good value of sales even better than what we did last year. Last year was also a good number there last year. Gurgaon should contribute in our expectations more than 1/4 of the total sales value of -- across those 2 projects should contribute more than 1/4 of the total sales value.
Okay. Got it. So just one clarification on this point. Ashiana Anmol is basically Phase 2, right, because Phase 1 we've been broadly sold pretty much, right?
Phase 1, we are sold out. It will be Phase 2, and we will launch Phase 3 as well in this year.
Okay. So Phase 2 has not -- has been launched or sorry, I missed that part. Has it been launched in FY '22?
Phase 2 was launched in Q3.
Okay. Understood. And sir, from a reported number point of view, this year was also -- is also expected to be good. And I think in the last call, you mentioned that we are targeting 15% ROE this year. So do we stand by that? I mean if you can just talk a bit about that as well.
So we would -- when we look at -- given some clarifications, I would be at what we would -- we are targeting to get to 15% ROE, but we look at an economic basis internally in the company reported basis is a little bit more deferred. So this year, I was incorrect in my expectations, have reported profits this year when we have reworked the numbers, we will get double-digit ROE numbers. But right now, seem on a reported basis, seem a little further away than this year. But in an economic basis, the way we track, we have seen improving ROEs, and I think that will continue this year. And hopefully, we should get into the teams on an economic basis this year as per our expectations. But the reported numbers will take some time to flow. It will tend to be.
Sure. And just one more thing on these launches. Are these more evenly placed or more towards the back end of the year? How should one think about? And how are you doing about this?
So sale launches, I'm not completely aware of right now when we will stagger them, they get timed. The new greenfield launches, I think we should do about 3 of them in the first half of the year and 3 of them in the second half of the year. So 3 projects we have actually applied for RERA already. So one in Pune, one in Gurgaon and one in Bhiwadi. 3 projects to RERA has been applied for. So depending -- they might get carried forward to third quarter, but I expect those to get launched in the second quarter, the way things are progressing right now.
[Operator Instructions] The next question is from the line of [ Rohit Prakash from Marshmallow Capital ].
My second -- my first -- my question is on the industry in general. So I think a couple of months back, there was a release from CREDAI, which mentioned that because of the rising commodity prices, some of the players might not be able to construct that -- so the components because the construction cost has gone up too much. So just wanted to get your sense of what -- I mean how is the commodity cost affecting us? Are we able to maintain our spreads and margins with higher material costs because it's a very weird situation that sort of projects which did extremely well, they didn't penalize because we are having to concert it with higher material costs. So could you repeat that a little bit, please?
[ Rohit ], so let me take the second part of the question first. So I think whatever key things has been that -- if we are quick to construct, then the commodity prices have not hurt us, right. I'd say, we had a very good launch in Ashiana Daksh and Ashiana Aditya. Those projects, because we constructed relatively quickly, the time gap between locking in the sales price and the construction cost incurring was not very high. The problem really happens to a lot of players where you've locked in the sales price early on and then your construction time lines are far longer than we would expect either because of the nature of the construction or sometimes just because of not able to managing the construction management. We are able to run the projects in a tight schedule, so that does not hurt us.
One place like in Ashiana Amantran Phase 2 which is a smaller piece, but the time line is just because of the way the phases were structured, and when we were seeing demand, we sold Phase 2 a year before actually really starting full-fledged construction on that field. And there, we will get hurt because of commodity price because the price was locked in earlier in construction cost happened later. And commodities are also -- majority of the commodities are actually consumed heavily in the early part of construction. Steel, RMC, those consumption is in the early part of the construction, you do consume cement, bricks and all later, but the proportion of consumption of commodities are in the first 15 months of the construction taken are much heavier than in the later phase. That said, finishing costs get commodity prices flow into finishing costs, which they sometimes do that can be a problem like they have closing a little bit tensions.
That said, now coming back to question 1 on maintaining margins. I see from a long run perspective, margin expansion. We might have a slight compression in our gross margins for the next year or 2 because of this commodity price cycle that you're seeing, I think well sold units. But the expectation -- expected compression in margins is not very significant, but higher volumes on a similar fixed cost base, I think we will have an expansion of net profit margins, therefore, happening in EBITDA margins, happening -- expanding because of the same.
And from a longer-term perspective, I have a very strong view that the overall expansion in sales prices will be higher than the expansion in construction costs. And we should have margin expansion over the next 3- to 5-year basis. I think real estate is also changing into a project. Vikash also just added to me that I think senior living mix is also improving in the project mix and senior living tends to enjoy a higher gross margin for us. So that will also lead to some margin expansion for us as we go on. I think those were some of the things. So I am quite bullish over the next 3 to 5 years for us.
[indiscernible] in Kid Centric, we should get better gross margin, right?
Kid Centric, we should get a better gross margin after some time. I think it is still work-in-progress in terms of creating differential value for the customers or differentiated value, which see anything also took a base, which now it does. I think Kid Centric Homes will take a little bit longer before we start enjoying higher margins there.
Got it. So could you also spare -- so as a percentage of saying we maintain that we'd like to maintain the land cost to the 15% to 20%. So what portion of the sales will be construction costs? What is the number [indiscernible] generally?
We typically look at about a 30% gross profit margin. Gross profit margin is sales, less construction costs, less land cost and less what we call project overhead cost. Project overhead cost includes cost of approvals, cost of architects, those things, construction session on that. We will say that we have to pay any sort of other. And also what we look at as project level financing costs also put into that thing. So in our view, all of those things should total about 70% of sales value on an average. Looking joint venture projects, sometimes they go up to like 72%, 73% and our gross margins do come down.
At the time, we are looking at the project. And how the future actually behold is very different, sometimes margins expand, sometimes be compressed. So typically, my view is that we should look at about 45% of revenues as construction costs, 5% of revenues as project coverage and about 20% of revenues as sales price on a blended basis, revenue share, we also have given -- we typically give mid-20s revenue share, like 22, 23, 24, 25, and that's the typical revenue share that we offer in those situations, sometimes the margin compresses, sometimes we believe our construction cost would be a little bit lower. That's the typical perspective.
So the 45% construction cost that you said, what will be retail and what will be labor, if you could?
Say that again.
So of the 45% construction cost that you said, what would be retail and what would be labor?
So INR 100 of construction is typically INR 70 material, INR 20 labor and INR 10 of site overhead, construction and site overhead.
Perfect. So that was very helpful. And just curious [indiscernible] and in going back to what we saw about the CREDAI press release. Do you see a reduced demand in credit competition when you're looking out and counting for land partners right now? And do you see an increased consolidation as well as the customer preference also concerned? Do you see any slowdown in construction by your peers in the locality at year-end?
So on point 1, actually, it's exactly the operators on the land side. Land prices are really ballooned over the last 12 months. I think we've been fortunate that we closed 6 transactions last year, and they will have healthy margins because land prices were low. We closed transactions, land transactions were locked in 6 months prior to that before closing, and we get good prices. On the land price, we are seeing lots of competition, and we are, right now, really mostly scouting in Jaipur and Gurgaon, Chennai and Pune and Jamshedpur, we're scouting, Jaipur, Gurgaon and Jamshedpur. We have in Pune, Chennai, Jodhpur and full with the 2 new projects to be launched in each of those cities.
In all these 3 cities, I think the floated layout market has been on fire. And that is -- those are the guys really competing for less -- less of the guys who really want to do development. And that is creating a lot of land price increases. So therefore, finding new land opportunities is a little bit of a challenge at this point in time. That said, we were able to close one transaction about a week ago, a week, 10 days ago for -- in Jaipur and at decent terms as well. So that's where it sits.
On construction volume, I believe we are a little far away from construction volumes going up across the country on a substantial basis, but not too far away.
I think new developers are entering the market which will have -- who will have clean balance sheets, fresh starts and we will be able to up construction. That said, the availability of capital remains a constraint. And I think the biggest constraint for a new construction supply to me will be availability of capital. If that starts changing significantly, I think a lot of new developers will join the market and increase supply. Right now, capital remains a constraint.
Perfect. That was very helpful. And last question from my end. So would I be right in thinking that with the high -- expectation of higher contribution from Gurgaon and Pune and higher contribution from senior living as well, we should comfortably cross the INR 4,000 mark this year. That would be the expectation, right?
Absolutely. I think we've crossed INR 4,500 mark for this year. Last year, the quarter 3 and quarter 4, we were comfortably above the INR 4,000 a square foot. Q4, we were at INR 4,093.
INR 4,100, we have already started to hit since the last 2 quarters of FY '22.
The next question is from the line of Pritesh Sheth from Motilal Oswal.
So firstly, on your INR 1,100 crores presales target. I mean not FY '23, but beyond that, how do we look to sustain it or grow on it? And how much does the current pipeline gives us the visibility? And let's say, if you want to sustain and grow on that beyond this, what sort of capital investment we would need to continue the add process in the pipeline?
Pritesh, we don't have -- so I think we've got to work on visibility beyond FY '23 right now. FY '23, '24, I think would still be okay because a lot of the projects we launched this year will continue into the next year, and we will carry some momentum behind them. I don't know how much we'll be able to sustain it right here. That said, I think Vikash, he is telling me that we've picked up 60 lakh square foot last year, we have about 30, 40 lakh square foot to sell from the previous year stock, like I think we have about 10 lakhs in ongoing phases about 4.5, 5 lakh square foot in some presales stock. We have Ashiana launch in some new phases to launch probably about 40, 50 lakh square foot from there as well of always put together. So I think a core or a 10 lakh square foot is probably crore, crore, 10 lakh square foot is what we have to sell.
My view is that we should average in these projects north of INR 4,500 a square foot. So probably around INR 5,000 crores of sales value is what we have to sell at this moment of time. So I think one key impact about it is to sustain this is to ensure that the cycle of these projects are, on average, 5 years and not average 7, 8, 5 years, that would have ensuring that we're able to hit presales numbers there.
And second, we need to do more transactions. I don't think we require capital. We have substantial liquidity right now. We have a 9 from IFC, which will come in right now a little bit needs to get disbursed. Additional capital requirements are in the short term, not a requirement. We are, as I said, looking to a, improve ROEs. So improving ROEs with proven profits that can fund this. Second, I think a lot of our capital was put in underperforming projects.
At one point in time, Ashiana Anmol had a very large proportion of our balance sheet. We freed a chunk now and the way sales are going there, we see money there. So I believe that a lot of our capital in what I would call underperforming projects should also get released. And that coupled with additional profits and churn in good projects, all of that put together, I think we'll be -- we are okay with the next, I think, 12 to 24 months at least in terms of doing the acquisitions to provide the projects for growth.
The question really is more at the land prices. The land prices in the last 12 months have gone beyond double. They have doubled up in a lot of places. And that just makes new projects done via unless and until we start looking at assumptions which are not inhuman. So I think navigating that is a much bigger challenge than capital. And let me put this -- so there are challenges, but capital is not the challenge.
Great. And on the capital-related question, my question was lastly on not if you require an external capital or not. But internally, how much we would need to fund these acquisitions? What are our targets? How much do you want to spend on these acquisitions on a year-on-year basis?
So the first, in FY '23, we are looking to spend about INR 200 crores on these acquisitions. So that's what we are looking to do. And if you are able to do joint ventures, then that would be even lower than that. We have some outright things in it structured that we would much rather do joint ventures if we can and keep the balance sheet and capitalize it.
How much do we get last year? I mean for the 6 million square feet addition, how much was...
Yes, I think we explained about our own equity, we would spend about and RFC line, everything put together for new acquisitions, about INR 250 crores, INR 260-odd crores would have gone all of that, including the projects that we get planned on things like that.
Okay. Great. And on the land price increase that you have been highlighting, do this is typically, I mean, a location specific, like I know Gurgaon probably have -- we have seen a sharp increase in prices, specifically people looking at lot of development or independent floors? But is it the case even in Chennai, Pune, as well, or this is particularly in a micro markets respect?
It is -- yes, I don't know across the board, either Chennai also, the place never leave as we are -- where we take the land by prices have gone up 1.5 to 2x, we've gotten also as to sell it also at a much larger value than we bought it at. So Pune, I'm not so well aware of, so I can't comment. But Chennai also land prices have gone up. And the driver of land price increase has also bought seen project layouts.
Seen, sorry?
Project layouts driving that.
Project layouts, okay. Got it. And now we are doing projects in Pune, Chennai, we already have exposure to -- of course you're in Rajasthan and Gurgaon. So what is the mix overall, we are targeting maybe 2, 3 years down the line? How much business we want to do from each of the micro markets?
So I don't know if we have a 2-, 3-year view right now to share, Pritesh. So we don't have clear view of markets. What we have is we do want a senior living to start contributing between 6 to 8 lakh square foot a year, okay. More from a percentage mix, I think we are looking at 6 to 8 lakh square foot a year. We would also want Chennai, Gurgaon, Pune to start contributing about 40% of our areas. And we will probably contribute a little higher on a revenue framework because their price points are a little higher in these markets, maybe 45-odd-percent on revenue frame, but that's what we are looking to get to. I think a larger understanding that we want is more than that. We want these locations to hit a minimum threshold of profitability and return on capital that we have put in these locations. I think that's what we are looking to get to.
So in Chennai, I think we have hit a minimum profitability target in Chennai. We've hit a minimum return on capital employed target as well that we look at on a location basis, that Chennai is already qualified for those 2. Now we have put more money behind Chennai if you want to take Chennai to the next level in terms of that. Gurgaon also was not doing so well. We have just started opening up in Gurgaon. I think FY '24 onwards, from our internal economic basis, Gurgaon also start hitting a minimum threshold of profitability at a minimum threshold of -- Pune is where the worry remains. We are not able to get the projects off yet. So even though we have projects, moving Ashiana Malhar, we have applied for RERA. So hopefully, we'll start kicking it off there. And more than the revenue targets, where we will look for it when -- how long will it take to the minimum ROCE in the interim threshold that we have. I think that's the largest game plan. I think that's the way we would look at this.
The next question is from the line of Rohit Balakrishnan from ithought PMS.
So sir, my question is also related to -- you just answered in the previous questioners, I mean, on sustainability of numbers. So I mean just from a -- so you mentioned you have about a crore worth of swap will be done with salability. And given what you've said in terms of your presales target this year, I'm assuming you'll probably be close to [indiscernible] kind of number. So is there -- I mean, this year, obviously, you've done many deals and many congratulations for that. So I mean, is there a broad framework that you're looking at in terms of, okay, we will have like expect to -- we are looking at a 2.5 million, 3 million run rate of sales every year. Some may be higher, some years may be lower, but broadly, it is better the run rate. These are an amount of like we need to back up or something like that? Is there some broad framework that we are working on? I mean if you can probably share that, it'll be helpful.
So I think if you look at the stack of the numbers, when we talk about crore kind of a pipeline which is there, considering the kind of acquisition we did in FY '22 as well and the kind of pipeline we have in future projects and the salable price that we are looking at something around INR 4,500 per square foot. I think the INR 5,000 crores, we can certainly look at on an average run rate of 2 million or 2 million plus kind of a number on a per hundred basis, so you can easily reduce that kind of a number. That is the kind of run rate we should try in it.
So just to add to it, I think that's the minimum threshold that we are looking at now. I think that we will look to expand that to 2.5 million, 3 million and take that further. I think at a larger thing. I think the thinking in the company as named allowed us is moved from just thinking top line to thinking we need 15% internal equity. Let's figure out how to get there. If there are 2 million, if there are 3 million that is at 1.5 million, let's figure it out. I think -- so a lot of play is also going around and thinking on margin expansion. So that is coming in from a higher sales price. So from a per square foot margin, we expand on a higher sales price basis.
To look at senior living projects, which have a little bit more -- less competition, therefore, and a very differentiated product to provide better gross margins for us on a percentage basis as well, not only just on a per square foot basis. So I think there is some more thinking around what do we need to do that we maintain 15% ROE on a threshold basis. So like if you want to do 2.5 million, 3 million square foot, we have enough capital to go ahead and lock in another 50 lakh square foot today, if not more, we can lock in probably 60, 70 lakh square foot.
If you go ahead and do joint venture terms, look at a joint venture, the problem is what the deposit people are asking for is the revenue share ratios that people are looking for. But that will compress margins and ROEs in the future. So I think the things we're looking to do is how do we navigate a minimum ROE threshold that we want to get to and keep that going. I think that's the critical theme that we're looking at.
I think otherwise, 2.5 million, 3 million square foot of run rate on any other basis right now, I think, the organization is geared up to sustain that for sure. 2 million so we have visibility anyway today with what we have. And I think 4 or 5 transactions we are looking at this year anyway is the feed. So I think that will keep -- maybe get the momentum higher. So I think figuring that out is a little -- is important for us and how do we keep the ROE threshold always intact.
So I think in a nutshell, the focus is on profitable growth rather than only growth.
Got it. So that's very helpful. Actually, I think you answered it, but what I was trying to sort of ask was that, I mean, given that we will probably do this run rate of sales, and that would mean that we are taking away from the overall salable area. So we would need to be on this -- we need to keep doing transactions every year or whatever the time frame is. So I was asking what was the overall thought process? Is it like we want to take 5 years' worth of sales in terms of like or...
We have always looked at 5 to 7x adverse sales number before this year. We might want to consider if we can work with a little lower threshold and maybe let's say 4x sales and if land prices are heavy, so it depends. Yes, last year, we did 6 million square foot. That's a lot more than our annual run rate because we saw growth potential, and we saw the market so price correctly in terms of line. So we will have some years where we'll do a lot of transactions, and we'll have some years which will be a little bit slower. I think we'll be a little bit more flexible around that. Earlier, we had a little bit more set thought we might want to be a little bit more flexible as we go around to ensure that we are able to keep always focused. So I don't think we'll come down below 4 and hopefully, it will not go up beyond 8.
Right. Okay. So just one more question, specifically, let's say, on Gurgaon in the micro market within Gurgaon that we are in. I mean how is the supply situation there? Do you see like supply increasing there? Or there is not still not much supply from quality developers like you?
So yes, on the supply side is mostly coming in what people call a scheme called build your scheme there, which is a plotted layout scheme. So more supply is coming in plotted layouts or they are coming in floors on these plotted layouts. The kind of projects we are looking to do group housing, it's a rarity right now launches in Gurgaon. So the kind of product we want to do, which was heavily oversupplied about 4 years ago, I think it's getting into an undersupplied scenario now.
If you look at the data, even on the website also of authorities like DTCP in the last 3, 4 years, if you try and call out the data as to what are the total approvals that have been given, those are very, very few. So the supply has been really constrained in this space.
The next question is from the line of [ Rishabh Dedhia ], an individual investor.
Just looking at the booking value folks like that Ashiana has been doing, and this has gone up quite a bit like from FY '19, I think this was around INR 40 lakhs, it's grew to INR 54 lakhs. So that's about 30% to 35% increase in selling price per plant. Like how much will you attribute this to land and construction costs versus improved company profitability?
[ Rishabh ], I would attribute a larger part of this to changing mix, 2, 3 things have happened from average flat area that we've been also selling has increased by about 10% over the last few years or the last couple of years. So I think we were -- average area was around 1,200 1,250, it's gotten closer to 1,350, 1,400 square foot that we are selling. So a little bit of it is that. Second bit is also some product mix changes, the Gurgaon contributing more, which is priced higher per square foot. So therefore, the change is also in mix. We have also increased prices on a per square foot basis. Till now, the increased prices and increased cost in land and construction are more or less covered right now in the older project that we are reporting. I think -- but as I said, margin expansion phase has started. So now whatever we are selling, I think in this year or this quarter, I think those projects now have better margins than they would have had a year or 2 years ago when we locked in the project 4 or 5 years ago. Depending on whenever we locked in the project, the margins today will be better than that time.
So now the margins will be like over 30% on a gross profit margin basis?
Not across, but some -- the new projects that we will launch, except for a couple network launched that were done in 2015, those deals are 2016, '17 transactions. Outside of those, I would expect margin expansion to happen, particularly some of the new transactions we have done. And as clarified, in joint ventures like revenue shares, we do compromise our margin sometimes because capital employed is lower, so they do come below the 30% threshold any way. Sometimes you do sometimes we talk in 24%, 25%, sometimes at 27%. We do compromise there depending on the location, salability and those. In those projects, we had okay at 25%, I would expect 27-odd-percent margins, like a couple of percentage points higher than what we have looked at. I'm hoping that whatever we sell now, gross margins will hopefully be around 30% on a blended basis. But those on a reported basis are certainly other way.
Okay. Makes sense. Also for indirect expenses, I think this was about INR 90 crores in FY '21. What would this number be in FY '22?
FY '22 or '23, you mean?
'22. What would this number be in '22? And then maybe also what you guys expect in '23?
Okay. So did you look at other expenses? There are 3 components that I would say 3, 4 components to the other expenses. One is general, what I would call, employee expenses and general and administrative expenses, okay. On a stand-alone basis, I think we had spent about INR 56-odd crores in these other expenses of that INR 56 crores, I think about INR 17 crores, INR 18 crores is selling expenses. Selling expenses for us are timed to revenue recognition. They are generally caused most of the -- 90% of selling costs are recognized when the expenses -- when the revenue is recognized and get carried forward as unaccrued selling expenses, so that will vary year-on-year.
But outside of that, what is about -- roughly about INR 48 crores, that I would expect to grow about 15% to 20% over the next year as a cost. And finance costs, so that should be closer to about INR 60 crores, INR 65 crores, that INR 46 crore figure would be closer to INR 60 crores, INR 65 crores. Selling expenses, I think we can look at about 4.5% of revenues that we will do generally. And the finance cost should come down actually. It has come down this year, and it should come down significantly. You can see quarterly the numbers are decreasing quarter-on-quarter. And finance cost should come down significantly. That's pretty much the components of the expenses.
Okay. Just one clarification, so you said like INR 56 crores [indiscernible] of SG&A, like general and administrative and [indiscernible] sorry, INR 66 crores.
INR 66 crores is SG&A, okay. Employee benefit expenses and other expenses put together on a stand-alone basis. Of that INR 66 crores, about INR 18 crores to INR 20 crores is selling expenses.
The next question is from the line of V.P. Rajesh from Banyan Capital.
I apologize in advance because I joined late. Varun I was looking to get guidance on the salable area for this year?
We gave an area book guidance. V.P., we're looking at doing a sale value of INR 1,100 crores this year.
Okay. So not in terms of square foot, but more in terms of value, right. Or we can...
Yes, we've -- internally, we are also shifting on a value basis a lot because the mix of the projects are changing substantially. And we also don't want to drive up prices a little bit. We see price opportunity increases. So given that we are focusing more on increasing -- and INR 1,100 crores is an aspirational figure internally to get to. But I think we'll get there. So -- but I think we'll definitely cross the INR 1,000 crore number and hoping to reach INR 1,100 crores also.
Right. And what was the number -- corresponding number this year?
INR 573 crores.
570. Okay. So almost looking to double it. Okay. And then on your Slide 24, future projects, still will run out of projects in Jaipur and Chennai really [indiscernible] from what I can tell there. So are you scouting for more land in Jaipur because, of course, in Chennai, you have acquired 2 land parcels. So I guess you're yet to accept there. If you could just comment about Jaipur?
In Jaipur, also, we have 2 projects that are coming up. The one we had acquired, which is Ashiana Ekaansh, which is in the land bank already, which is -- or in the future projects section, you said.
Yes, upside could be priced a little bit above.
And we announced our acquisition of another project about -- and we have announced another project about 10 days ago in Jaipur, around 6.5 lakh square foot that we just concluded in the month of May. So we have 2 and we are scouting for between 1 or 2 more transactions in Jaipur right now. As I articulated earlier, we need to find pockets where land prices are making sense. The plotted market in Jaipur is behaving irrationally according to me and very frothy. So land prices in some pockets are very frothy at this point of time.
Okay. So aside from Jaipur, is there any area where you've seen you are low on the land inventory?
Not right now.
Jamshedpur funding?
Jamshedpur and Gurgaon is also where we are scouting for more transactions.
So is that interesting because in Gurgaon, you already have this Amarah coming up, right? So you want to add more pipeline after this or in parallel with this?
In parallel with this, we want to add more pipe. In Gurgaon, we have a view that our brand is now getting further stronger sales momentum behind us over there, and we should try and make the most of that sales momentum with the view that we have.
Got it. And then Jodhpur and Jamshedpur, connect to a new admin cost sort of settle like market and not go to us. Is that a fair understanding? Or is something changing in those 3 markets right now?
Yes, there will be from the fringes there in terms of scale and opportunities. I don't see them becoming extremely large in terms of.
So Jodhpur is a market, any way which has for us large debt. But in terms of continuously doing some volume, Jamshedpur is in that space, in the sense that we'll consistently -- we attempt to get some volume. Although the volume is not to the extent in markets like Jaipur for sure. But then consistently, we look out for parcels, finding parcels in that part of India is a little difficult. But then they remain old and somewhat consistently -- some bit of volume-generating kind of markets. Jamshedpur is a market.
Right. Yes. Got it, Vikash, okay. So our core markets will remain Gurgaon, Chennai, Pune, which is sort of developing and obviously Jaipur, right? Those are the...
And Bhiwadi.
Yes, of course. I will always be there.
That's the [indiscernible] opportunity is becoming very large for us here.
Right. Talking about Bhiwadi, any update on Milakpur or is the status quo?
Status quo on Milakpur right now. We have filed for RERA or Phase 1 of Ashiana Adwik, which is in a senior living project there. I think that's the exciting part.
[Operator Instructions] The next question is from the line of [ Rishabh Dedhia ], an individual investor.
Just [indiscernible] Kolkata, are there any updates on the Ashiana [indiscernible]?
No. Those difficult stuff there, you'll know what to do.
Is it possible to actually see a capital by selling land?
We have been trying that. That's also been difficult to execute, but that is a possibility. As those transactions do take some time to put together, but we are working on putting something together to free up some capital for.
And you mentioned [indiscernible] so you were scouting for some opportunities in Ranchi area, I think in Eastern India. Do you scout some anything over there?
Can you say that again?
Ranchi was a location you were saying.
We are not considering Ranchi, we were considering it, given that Jamshedpur, we have work and we could do more work in Ranchi. I think we have decided not to explore Ranchi as a market right now.
The next question is from the line of [ Vivek Chaturvedi ], an individual investor.
Varun, just in terms of potential up move in interest rates in the year ahead, at what levels do you think there could be a slight slowdown in the interest in real estate market, another 100 basis points?
I saw peak interest rates at home loans have come closer to 11%, 10.75%, 10.8% was the peak home loan interest rates maybe 5, 6 years ago, and it came down slowly to about 6.5% level, right. In my view, about 8.5% of home loan interest rates, I think, we'll be okay and comfortable. That's the threshold where I think demands will start slowing down.
Okay. And do you think that this level is different for, say, Tier 1 cities versus Tier 2, Tier 3 cities, I think it's broadly similar across the country.
Vikash and I, here, both, we didn't have a view on this, but...
Here, I think across Tier 1 or Tier 2, I think 1.5% to 2%, even if the rate inches by that extent, the demand would be agnostic to it.
Yes, the same levels, 8.5%.
Okay. And are you also seeing -- how you seeing in an earlier question that the size of the flats that you are building and entering now have gone bigger, but [indiscernible] since COVID or it's broadly in that 1,300, 1,400 square feet range now?
I don't think it has anything to do with over those projects or client earlier, okay. Sales have happened post COVID, but they are coincidental that is there. I think this is just -- I think real estate has cycles of improved affordability, where unit prices increased both on a per square foot basis and a size, then size start compressing when affordability should peak and newer ticket sizes are decreasing. After a bit, there's no room left and post square foot prices also compressed. And you are right. That's the cycle that paid out over the last 7, 8 years. I think the cycle is just turning the other way around, where we are seeing better affordability for people to buy rooms and the cycle is turned.
And in our case, as we mentioned earlier, that it is a mix of projects, the geographical location like Gurgaon or which also are contributing in terms of increasing the per square foot culture and the size of the units also.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
We are glad to thank all of you for being on this call and being so patient with all the questions and answers. If we were unable to take any questions, please feel free to write those directly or reach out to us directly. And with that, we would like to conclude the call. A lot of the material we have spoken about is posted on our website, and you can also e-mail your queries for any further clarification. Thank you once again for taking the time to join us on this call. Thank you.
Thank you. Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.