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Monday June 27th, 2022

Iconic Developments: Creating Sustainable Value in Real Estate

Rohan Parikh Chairperson Iconic Developments

Iconic Developments Chairperson Rohan Parikh shares insights on Sri Lankan real estate prospects amidst an unfolding economic crisis. To thrive, real estate developers must execute well-managed, risk-free projects that deliver modern residences with superior value and appreciation potential; and that is what Iconic excels in doing.

Expressing the company’s commitment to the Sri Lankan real estate market, he aims the spotlight on Iconic Developments’ stellar performance and plans.

As the worst economic crisis unfolds in Sri Lanka, what is your outlook for the construction and real estate sector?

The short-term prospects of the real estate sector look very good from both the demand and supply perspectives. Investors are rushing to invest in real estate because it is an ideal asset to hold on to as an effective hedge against the hyperinflation Sri Lanka is now experiencing. Demand was strong during the pandemic as well. On the supply side, we expect a crunch as many projects stall due to rising costs and tight financing. There will also not be any new entries into the market because nobody will want to start a new project right now. So I think there will be a combination of a demand spike and a supply crunch, which in the short term, will mean that the real estate companies with outstanding inventory in the market will do well.

In the long run, as a real estate developer, we are bullish on Sri Lanka’s real estate prospects, provided there is stability, simply because there is a shortage of affordable quality housing. Factors such as the lowest urbanization rate in South Asia and the highest commute times for people working in Colombo mean that demand for housing infrastructure can only grow.

However, there is a caveat to our outlook. Real estate projects are longtail projects. Developers lock in prices and revenues today, spend over three years to get the project off the ground and then deliver the completed homes or apartments to investors. So, in an environment of economic stress, developers will be hesitant to commit to new projects, and the products that do start will carry an inherent risk. So the medium term will depend on how quickly Sri Lanka can stabilize the economy.

How is Iconic Developments geared to withstand the challenges ahead and unlock growth opportunities? What is your strategy around risk in a volatile market environment?

We have a simple strategy for dealing with volatility: we don’t deal with it. We never commit to a project unless we see a stable macroeconomic environment for the proceeding 24-36 months. In long-duration projects like real estate, and especially in smaller markets, like Sri Lanka, prone to frequent economic shocks, you are essentially taking a bet on the macroeconomy, so trying to gauge long-term stability is critical.

We contain risk exposure for our ongoing projects by spreading revenue flows throughout the project life cycle.

Most other developers try to sell out their inventory in advance and lock revenues and then get hit by escalating construction-related costs. But we don’t do that. Instead, we sell in phases throughout the project development cycle so that if we encounter spiking development costs, we can then adjust our revenue. Given the economic challenges in Sri Lanka, I believe real estate developers will soon switch to dollar pricing, and some have already done so. Sri Lanka will become a notionally dollarized real estate market with prices anchored to the US dollar rather than the rupee. That is the only way real estate developers and investors can undertake long-term projects without succumbing to cost volatility.

Can you tell us how Iconic is reassuring its stakeholders that the company will deliver the best possible outcomes?

At Iconic Developments, we remain committed to delivering the best possible outcomes to our stakeholders by acting on our promises and attracting investors to Sri Lanka while sustainably committing to a greener Colombo.

We proved our value proposition and commitment to this market with our previous projects, the 24-storeyed 110 Parliament Road and the 33-storeyed Iconic Galaxy, both at Rajagiriya, delivering modern apartments with incredible amenities. Our next project, Iconic Skye, will push the possibilities further.

We have a track record of delivering projects on time with the promised quality specs. If we take Iconic Galaxy, despite the 2019 terrorist attack, change in government, the Covid-19 pandemic and the unfolding economic crisis, we will still deliver everything as promised on time.

We can do that because of the intense planning, securing adequate financing, managing every aspect of the project well, and building the financial strength to withstand any threat from external factors. Because we are an engineering company, we understand what it means to plan projects around complex events. So when I say we will deliver stakeholders the best possible outcome, it means you get what you paid for at the quality you expect. And that is something that we’ve been able to ensure in all our projects. I think our clients will be a testament to that.

You are planning to launch Iconic Skye around this time. Tell us more about Iconic Skye and why is it a compelling option for investors?

We intend to embark on this project soon, signalling our deep commitment to this market.

Our success in the real estate market is primarily down to two things. One is offering an unbeatable price-to-value ratio. We’re not the cheapest in the market, and we don’t intend to be. However, any investor can compare our residences on a square-foot basis with anything else in the market and discover an unbeatable value proposition. The second is delivery. Iconic Developers is a financially conservative company. Every project is ring-fenced; we do not deploy funds intended for one project to finance another to ensure we never get into a situation where a project is halted or delayed for financial reasons.

So the fact that we have a high-quality proposition in pricing, timely delivery, and well-designed and optimally located projects meant that investors have always seen incredible appreciation in value. People who have come in at the start of projects have doubled their money or more, and those who have come in midway have seen a 50-60% appreciation after we hand over completed apartments.

Iconic Skye will have a similar value proposition on top of new innovative features. We are introducing the concept of affordable luxury duplexes that offer more space and privacy. Designed to be self-sustained and self-contained, packed with modern amenities, Iconic Skye residents can fulfil their shopping, entertainment and recreational needs without leaving the property, which will also have shared workspaces for those working remotely. Iconic Skye has everything from a swimming pool to a party area, food court, play area, business centre, movie theatre, mini-movie theatre, laundry point, boutique shops and mini-supermarket. You can spend four months in the building and never go outside, making Iconic Skye a high benchmark for unique modern living experiences in Sri Lanka.

I would gladly encourage anyone interested in availing themselves of an early investment opportunity in Iconic Skye to reach out to me directly at rohan.parikh@acresfoundation. org for any assistance.