Godrej Properties prepared to buy back all units in contaminated Gurgaon building

Godrej Properties is prepared to buy back all the units that it has sold in Godrej Summit in Gurgaon, a project in which the concrete used was found to be contaminated with chloride that causes corrosion in the steel reinforcement when mixed with water.

Executive Chairperson Pirojsha Godrej said that so far only about 50-odd residents have expressed interest in selling back their units of which 10 agreements have been executed. The sales in the project were a little over ₹1,000 crore.

“Our sense is that only a small portion of that (the total sales) is likely to come back, but, of course, the offer is open to any customer…we see the potential liability as all the customers,” Godrej told analysts. He added that most customers were interested in remaining in the project.

The earnings call to discuss the first quarter results of the company was partly dominated by the Gurgaon project, where a defect in one of the apartments led to a quality audit of the building by an external expert resulting in the discovery of the contamination in the concrete. The building was completed in phases in 2017 and 2018.

Godrej said that the buyback price would be linked to the sale price of the units which had been in the range of ₹5,000-7,000 a square feet at the time of the launch. He added that the company had acted promptly to ensure safety of the customers and their financial security.

Those who were staying put would be provided rentals during the period of the repairs. The cost of repairs as well as any customer claims has been estimated at ₹155 crore, which has been provided in the June quarter results, reducing the profits by that amount.

The company believes that it can make a claim against the contractors though it has yet to take legal action against them.

The units bought back will be resold after they have been repaired.

Godrej also said that the company would undertake audits of buildings that it had constructed and sold in the vicinity of Godrej Summit s well of its national portfolio.

Muted launch quarter

The Mumbai-based realtor had a muted June quarter in the terms of bookings with some planned launches getting delayed due to slow pace of approvals.

Bookings during the quarter fell 11 per cent on year and 44 per cent sequentially at ₹2,254 crore, with some planned launches delayed. It registered 22.5 lakh square feet sales in the reporting quarter, down a fifth year-on-year.

The company said it expected an improvement in momentum in the second quarter of FY24, and that it was on track to meet its full-year guidance of ₹14,000 crore. Collections, however, rose by over a fourth to ₹1,954 crore.

It reported a consolidated net profit of ₹125 crore in the June quarter, up 174 per cent on year, while revenue from operations was up 3.8 times from year ago at ₹936 crore.

It added four new projects from April to July, with a saleable area of 37 lakh square feet and booking value of ₹6,450 crore. There was one launch in Kolkata and three launches in Gurugram.