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