‘Realty Scene Can Change if There’s a Reg­u­la­tor in Place’

The Economic Times - - Companies -

Real es­tate de­vel­op­ers should not be in a hurry to in­crease property prices once de­mand picks up be­cause sup­ply is also likely to im­prove as a re­sult of pol­icy de­ci­sions if a sta­ble govern­ment takes over af­ter the gen­eral elec­tions, says Oberoi Realty chair­man and man­ag­ing di­rec­tor Vikas Oberoi. In an in­ter­view with ET’s Kailash Babar and Divya Sathya­narayanan, Oberoi says he is not per­turbed by the in­ven­tory lev­els in the mar­ket as he does not con­sider un­der-con­struc­tion units as in­ven­tory. Ex­cerpts: With in­ven­tory pil­ing up for over 48 months in Mum­bai, where is the property mar­ket headed? I don’t con­sider un­der-con­struc­tion property as in­ven­tory. I con­sider only ready-to-move-in property as in­ven­tory. How much of such sup­ply is avail­able right now? There is noth­ing avail­able with any de­vel­oper that can be put in this cat­e­gory and is not sell­ing. It is very clear that there is stress on in­ven­tory due to slip­page in de­liv­ery. To­day, the buyer is not buy­ing be­cause it is ex­pen­sive but be­cause he is not sure of de­liv­ery. De­vel­op­ers have not been able to deliver due to var­i­ous rea­sons in­clud­ing stuck or slower ap­provals or change in reg­u­la­tions. The scene can change if there is a reg­u­la­tor in place. How have prices changed over the past six to 12 months? Have de­vel­op­ers’ re­al­i­sa­tions gone up? If you are in an in­fla­tion­ary econ­omy, if you have sup­ply con­straint, if you have ap­proval con­straint, if you have fund­ing is­sue, if you are lever­aged; all these things will not al­low you to build. And then there will be scarcity, and this leads to higher prices as people have be­come as­pi­ra­tional. It may have gone up but it has not re­ally gone into the de­vel­op­ers’ hands be­cause they are pay­ing in­ter­est, hit by in­fla­tion and hit by additional cost. With all these the prices may not have gone up but the mar­gins have been hit. Has the sit­u­a­tion im­proved in terms of ap­provals in Mum­bai? One thing we have to give to the govern­ment; it has at least cre­ated a level-play­ing field. It has pre­pared a frame­work, has clar­i­fied the pol­icy and re­moved the am­bi­gu­ity in law, but that is not enough. We have to tighten the pro­cesses. Go­ing for­ward, if the govern­ment, de­vel­op­ers and buy­ers sit to­gether and un­der­stand the is­sues and try to sort them out, why just real es­tate, any sec­tor will do well. Do you think a sta­ble govern­ment will lead to re­vival? A sta­ble govern­ment can do mul­ti­ple things and ev­ery­body is ex­pect­ing a sta­ble govern­ment. A sta­ble govern­ment is ob­li­gated to give hous­ing to people at low cost. If prices have to come down, the in­put cost will also have to come down. If the de­lay in ap­provals can be taken care of, the ben­e­fit will be passed on to the cus­tomer. De­vel­op­ers will be keen to do that. Then, we have to start build­ing in­fra­struc­ture fur­ther. This will lead to shorter dis­tance and time, leading to more sup­ply and con­trol on prices. You just cre­ate in­fra­struc­ture and let people fol­low, that’s how things are done world over, but we move in a dif­fer­ent way. Has ac­ces­si­bil­ity to funds for de­vel­op­ers im­proved? Money is avail­able, but this time people want to give money only to good projects and de­vel­op­ers that have shown good track record. How else, do you think, such big merg­ers are tak­ing place world over and here too? Are de­vel­op­ers likely to in­crease prices if de­mand im­proves? If de­mand im­proves and sup­ply in­creases, de­vel­op­ers will make more money by sell­ing at cheaper prices. Realty de­vel­op­ers should not be in a hurry to in­crease property prices this time once the mar­ket sees a re­vival, which is ex­pected fol­low­ing the for­ma­tion of a sta­ble govern­ment soon. The rea­son is that a sta­ble govern­ment will not only im­prove sen­ti­ment, it will also in­crease the sup­ply through var­i­ous pol­icy de­ci­sions. I am not look­ing at per apart­ment pric­ing go­ing up, that’s not the game. Has Oberoi Realty al­ready paid the con­sid­er­a­tion for Tata Steel’s land par­cel in Bori­vali? Yes, we have al­ready paid it as per the con­tract en­tered in March. What is the cash bal­ance po­si­tion now? We can­not dis­close that right now. Why didn’t you tie-up with St Regis for your Worli project? As a lux­ury brand, Ritz-Carl­ton is miles ahead. It’s in a league of its own and known for its best ser­vices. When ev­ery­one in the mar­ket is look­ing at bring­ing in mid-mar­ket brands, do you think lux­ury seg­ment is the right choice? This brand has not been brought in to make money out of the ho­tel. This brand has been brought in be­cause it is go­ing to col­lab­o­rate with the res­i­den­tial de­vel­op­ment and ser­vice the res­i­dences. The cost of the ho­tel will get taken care of from the ap­pre­ci­a­tion that we get in res­i­dences.

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