Casa Grande, the Chennai-based real estate player, has scaled up tremendously – both in terms of financials as well as brand – since starting up in 2004. Its next jaunt – become a pan South India player and, possibly, touch sales of Rs. 2000 crore by FY 2017
Owning a home is a dream that all of us have and there are many companies working towards helping us achieve this dream. One such player is Casa Grande Private Limited (Casa Grande), a Chennai-based real estate company that specialises in constructing villas and apartments in the Southern part of India.
Founded in 2004 by Arun Kumar, a first generation entrepreneur, and K.R. Aneruden, Casa Grande operates in the residential segment and builds luxury villas, apartments, layouts and retirement homes. The founders are deeply focused on building systems and processes to ensure professionalism and transparency, so its various stakeholders – including its customers and investors – continue to bet on the company. “In the real estate sector, it has been a seller’s market for a long time,” says Arun Kumar. But all this is changing now. This management graduate, who briefly worked at Wipro, is focusing on creating good practices, which he believes will turn the tables in India’s real estate sector.
The early days
“The sector always looked very capital intensive. So, during the first year, we got a capital of around Rs. one crore from my friend’s father, Mr. R K Ramanathan,” recalls Arun Kumar. The company started with a small project in the city (six to eight units) and for almost three years, it took up smaller projects built within two to three grounds. “It is important to do prototypes and then scale your operations. In fact, if you templatise a business, it is easier to scale it up. So we templatised it well for the first three years. Then we started doing bigger projects within the city and, eventually, moved into large scale projects,” says Arun Kumar. By then, the primary investor (which eventually became Fulcrum Ventures) invested an additional sum of Rs. 3 crore while banks and HNIs funded the business further, which helped them scale up.
If companies like us want to scale up there has to be more funds. It can come from a landowner who trusts your brand and agrees on a joint venture, or one should be able to mobilise huge capital to do outright purchase of property and develop it,” says Arun Kumar. Today, after gaining considerable muscle and size, the company balances between joint ventures and outright purchase.
During the second phase, the company graduated into bigger projects and also started to build its brand. “We did good quality work, were transparent in our dealings with our customers and respected the home buyer. These factors created a lot of goodwill for us,” recalls Arun Kumar. As the company started to grow, they focused on hiring quality people, which helped in creating a great brand and delivering projects on time, consistently. Explaining it further, he says that the company does not depend on outsourcing construction activities. It has its own in-house construction team that gives it the leeway to mobilise materials and labour on time.
“Lack of transparency had messed up things for a home buyer but now bigger players have emerged and standardised the operations,” says he. In India’s real estate sector, CREDAI chapters control and regulate the builder community. Besides this, competition has set in and now it has become a buyer’s market. Every builder has to create innovative, real, differentiated products, which suit the micro market or the audience.
Casa Grande, for example, entered the villa space when everyone was chasing the apartment space. It has now become a leading player in the villa sector. Its current average between villa and apartment offering is in the ratio of 50:50. “Others have only 10 per cent to 15 per cent of their portfolio as villas. If retirement homes are taken into account, then the offering will be 5 to 8 per cent of retirement homes, 10 per cent of plots and 40 per cent each of apartment and villas,” states Arun Kumar
Today, the company has completed almost 52 projects and expects to launch close to 24 projects in the next one year. In the next four years, Arun Kumar wants to make Casa Grande a top builder in India. The company has a presence in Bengaluru and Coimbatore and is now moving into Hyderabad and Cochin. “We want to become a pan-south player with relevance and considerable penetration in each market,” he says.
“If companies like us want to scale up, there has to be more funds. It can come from a landowner who trusts your brand and agrees on a joint venture, or one should be able to mobilise huge capital to do outright purchase of property and develop it,” says Arun Kumar. Today, after gaining considerable muscle and size, the company balances between joint ventures and outright purchase.
The company has also tapped the private equity space for growth capital. Motilal Oswal PE has invested Rs. 70 crore in the company while Avenue Venture Real Estate fund has invested Rs. 100 crore in the company and plans to invest another Rs.100 crore this year. “This has been possible because the company has offered good returns and operates in a transparent manner with some good processes,” says Arun Kumar. The company gave a 10x exit to Fulcrum on a total investment of Rs. 5 crore. He does not rule out an IPO in the next 2.5 years and expects good stability in business by then. “It could even extend up to four years,” says he.
Casa Grande believes in working with partners. For instance, when it expands to new cities, it forges partnership with an entrepreneur from that city, someone who understands the local geography, and gives them stake in the local entity.
This apart, as a group, Casa Grande believes in growing new ventures, which may or may not have synergy with Casa Grande, the real estate company. For instance, it operates ‘DoMyHome’, an end-to-end interiors solutions provider (woodwork, electrical, false ceiling etc.) for a homebuyer, Casagrande Propcare, a facilities management company and Casa Grande Distripark. “All our ventures are by people who have stakes in it – about 20 to 25 per cent – and the balance is owned by us,” states Arun Kumar.
The company also has a venture capital arm called Propel Ventures which funds all the allied businesses through which it has started a chain of laundry services. It has also funded an online property portal, as it believes that there is a void in this space in terms of truly helping a homebuyer identify hidden inventory
This fiscal, the company expects to record sales of about Rs. 700 crore (revenue recognised Rs. 400 crores) as against Rs. 500 crore in sales (revenue recognised Rs. 250 crore) last year, thus targeting a growth of 40 per cent. By FY17, it aims to touch a sales figure of Rs. 2,000 crore (Rs.1000 crore recognised revenue) and to achieve this, it aims to expand its presence and become a pan-south India player.
This apart, every city has new pockets emerging and the existing ones getting stronger. The company aims to leverage on this and extend its product offerings across these geographies. “From a pricing perspective, we want be able to cater to the varying needs of the homebuyer,” says Arun Kumar.
The company is also planning to focus on the bottom of the pyramid segment (Rs. 8 lakh to 22 lakh space) and has a project coming up in Kelambakkam. As a means to keep the pricing affordable, it is banking on better technology, which will ensure that the cost per square feet is significantly reduced. Additionally, it aims to focus on huge volumes, around 1,000 to 1,200 homes in a project, to create better facilities for the BoP segment.
“Ultimately, we want to be in a place where a buyer turns to us when they think of buying a home. In turn, we will create something that will suit their needs,” concludes Arun Kumar.
Go deeper in the market with a variety of products – villas, apartments, layout – premium and affordable
Every city has new pockets emerging and existing ones getting stronger. Capitalise on it by ensuring that product offerings are extended across these geographies.
From a price perspective, cater to the varying needs of the home buyer; Enter the affordable housing segment
Work towards becoming a pan south India player
Continue to scale up its allied businesses – DoMyHome, CasaGrande Propcare etc.Avenue Venture Real Estate fund Casa Grande Fulcrum Venture Motilal Oswal PE Propel Ventures Real Estate