Where a developer's finance work really happens

Under the Real Estate (Regulation and Development) Act, 2016, a developer must deposit 70 per cent of the money it receives from a project's buyers into a separate account and may withdraw it only to meet that project's land and construction cost, in proportion to the work completed and on certificates from an engineer, an architect and a chartered accountant in practice. I treat that rule as a floor. At Mridvika each of our 34 projects has a ledger showing receipts, withdrawals, cost incurred and cost to complete, and each keeps a minimum balance equal to the next ninety days of construction spending before anything is released to the company. Land cost on multi-phase layouts is spread across phases by saleable area, so an early phase cannot draw the whole plot's cost. In 2020–21 that approach left ₹310 crore in project accounts that the certificates would have released. It also meant that no project waited for funds when collections fell during the lockdowns.

Land is the largest and least reversible decision a residential developer makes, and in Maharashtra and Karnataka it rarely arrives with a perfectly clean title. About 45 per cent of our area under construction sits on land held under joint development agreements, in which the landowner contributes the plot and receives either a share of the built area or a share of revenue. I model each option over the life of the project. Outright purchase ties up capital early and carries title risk on our balance sheet. An area share hands the landowner inventory that may be sold below our prices. A revenue share costs margin but keeps pricing with us. I also watch land advances, the deposits paid to landowners before a deal becomes enforceable. Since 2021 no advance has been paid without a title report from our counsel, a review of the land records and a long-stop date after which the money must be returned.

Three numbers describe a residential developer's year, and they are routinely confused. Pre-sales are the value of homes booked, net of cancellations. Collections are the cash buyers actually paid. Revenue, under Ind AS 115 as Mridvika applies it, is recognised when control of a home passes to its buyer, which for us is when possession is offered after the occupancy certificate. In a year of heavy launches, pre-sales run far ahead of revenue; in a year of handovers, the reverse. Since 2021 our results presentation has led with collections and handovers, and it shows pre-sales after cancellations with the cancellation rate stated. I also report the value of homes sold but not yet handed over, ₹6,850 crore at March 2026, together with the estimated cost to complete them, so that investors can see the margin still to come and the spending required to earn it.

I have rated developers, lent to them and borrowed for one, and the three experiences have taught me what a lender needs to see. Indian banks generally do not finance a private developer's purchase of land, so land is funded from equity, internal cash or NBFC money, and construction from bank loans secured on project receivables. Between 2021 and 2022 we replaced ₹1,150 crore of NBFC construction finance, at about 13.8 per cent, with bank loans and a ₹750 crore qualified institutions placement. Each bank loan is tied to a project's designated account, with a sweep that repays debt from surplus receipts. Two rating agencies have raised our rating from BBB+ to A since 2020. In meetings with them I lead with project-level cash cover and cost to complete, because that is what I used to ask developers for, and it still decides whether a developer can survive a poor sales year.

Mridvika is promoter-led, and in Indian residential development the promoter family often owns land the company could use. That makes related-party discipline the most sensitive part of my work. Every transaction with a Kirtane family entity reaches the Audit Committee for prior approval with independent evidence: two valuations by valuers the committee chooses, and a comparison with our joint development agreements with unrelated landowners in the same micro-market. Where a transaction is large enough to be material under the SEBI Listing Regulations, it also needs shareholders' approval, and related parties may not vote to approve it. In 2023 that process changed the terms of an 18-acre family land deal from a 45 per cent area share to a 35 per cent revenue share. In 2024 the Audit Committee adopted a standing policy, drafted by my team, that sets the evidence required for any future promoter-group land transaction before a specific parcel is on the table.