Res­ur­rect­ing The Sec­tor

NBM&CW - - REAL ESTATE & CONSTRUCTION -

In­dia's Real Es­tate Sec­tor is see­ing a resurrection with the sev­eral struc­tural changes ini­ti­ated by the gov­ern­ment in 2017. The Gov­ern­ment has put hous­ing on a high growth tra­jec­tory by of­fer­ing tax and fis­cal in­cen­tives to builders and con­sumers, and through new con­sumer-friendly poli­cies. It is an­tic­i­pated that in­sti­tu­tional fi­nanc­ing, higher limit on ex­ter­nal com­mer­cial bor­row­ings (ECB) will at­tract more in­vest­ments in the real es­tate and in­fra sec­tor from FDI and FlIs. The Real Es­tate In­vest­ment Trust (REIT) is another in­stru­ment that has been wel­comed by the in­dus­try. Though hic­cups re­main, and im­ple­men­ta­tion is some­what tardy, mar­ket play­ers are op­ti­mistic of a pos­i­tive out­come in the long-term. Com­pany heads of Hi­ranan­dani Group, Su­pertech Lim­ited, Transcon De­vel­op­ers, Spenta Cor­po­ra­tion, and Aparna Con­struc­tions, dis­close the im­pact of the Gov­ern­ment poli­cies and reg­u­la­tory changes on their busi­ness, their com­mit­ment to com­ply with the reg­u­la­tory changes, and their an­tic­i­pa­tion of a resur­gence in res­i­den­tial, real es­tate, retail, lo­gis­tics and warehousing retail sec­tors, all of which bodes well for the Con­struc­tion Equip­ment in­dus­try.

Gov­ern­ment Poli­cies Is In­dia’s Real Es­tate sec­tor see­ing a re­vival of sorts in view of pol­icy re­forms such as RERA, GST, REITS and the Be­nami Trans­ac­tions (Pro­hi­bi­tion) Amend­ment Act?

Dr Ni­ran­jan Hi­ranan­dani, co-Founder &

MD, Hi­ranan­dani Group: Busi­ness cy­cles tend to be pre­dictable – any phase which is de­fined by slow move­ment and low take­off is fol­lowed by a pe­riod of higher sales and price-point in­creases. In­dia is also wit­ness­ing the ini­tial phase of the next ‘up­swing’, the reg­u­la­tory changes and also the new le­gal frame­work will en­hance the growth level. This will en­sure a bet­ter sit­u­a­tion for de­vel­op­ers and prop­erty buy­ers by bring­ing trans­parency and ac­count­abil­ity within the sys­tem. RK Arora, Chair­man, Su­pertech: The realty mar­ket has ab­sorbed all the re­forms, which gave much con­fi­dence to home­buy­ers. The mar­kets of Delhi NCR saw corrections in some pop­u­lar hous­ing pock­ets of Gur­gaon and Noida, and their sales vol­ume has in­creased in the wake of these price corrections. Now, the sec­tor is show­ing signs of re­cov­ery, and both mid- and af­ford­able-hous­ing seg­ments are reg­is­ter­ing im­prove­ments in sales. Aditya Ke­dia, MD, Transcon De­vel­op­ers: The re­forms have brought about a swift, ef­fi­cient, ac­count­able and well-timed pro­ject de­liv­ery. By im­ple­ment­ing these poli­cies, the in­ter­est of the end buy­ers has been pro­tected, which has brought a pos­i­tive sen­ti­ment in the prop­erty mar­ket. These con­struc­tive mea­sures will bring in aug­mented trans­parency and ac­count­abil­ity, and by en­hanc­ing the in­dus­try’s re­li­a­bil­ity, it would at­tract more sources of in­vest­ment. Due to an in­creased flu­id­ity in the mar­ket, FDI could also surge. Farshid Cooper, MD, Spenta Cor­po­ra­tion: Real Es­tate has long suf­fered from rep­u­ta­tional is­sues. The new poli­cies have helped al­le­vi­ate con­sumer fears and anx­i­eties. If SEBI and the stock mar­ket are any­thing to go by, we can ex­pect in­creased vol­umes in our sec­tor over the next few years. The im­ple­men­ta­tion of GST was par­tic­u­larly cum­ber­some as the sec­tor faced tem­po­rary paral­y­sis from a trans­ac­tion stand­point. That said, the longer-term ben­e­fits of a sin­gle tax struc­ture are ev­i­dent. In a nut­shell, the steps taken by the gov­ern­ment to stream­line our in­dus­try are start­ing to take shape and the ben­e­fits are bound to fol­low.

Im­pact on Busi­ness

How have you re­vamped your busi­ness model in view of the above?

Dr Ni­ran­jan Hi­ranan­dani: As a re­spon­si­ble cor­po­rate en­tity, we have been fol­low­ing these as­pects in course of our busi­ness since past few years. The reg­u­la­tory changes im­pact those real es­tate com­pa­nies which were fol­low­ing other ways of work­ing. What we have been fol­low­ing for all these years is ef­fec­tively what the new reg­u­la­tory regime brings in.

RK Arora, Su­pertech: We have fast tracked our op­er­a­tions and are de­ter­mined to de­liver all our projects on time. The ₹1,000 crore re­ceiv­ables from the buy­ers for de­liv­er­ing about 17,000 units by end of De­cem­ber 2018, will be fur­ther utilised to re­pay our debt and re­main­ing for the com­ple­tion of projects. We have well­main­tained es­crow ac­counts for all projects and are com­mit­ted to com­ply with RERA norms by reg­is­ter­ing all our projects. We

RERA has im­mense po­ten­tial to re­vive buy­ers’ con­fi­dence and drive mo­men­tum in the res­i­den­tial real es­tate mar­ket. States such as Ma­ha­rash­tra, which im­ple­mented the reg­u­la­tion in true let­ter and spirit, wit­nessed signs of uptick in res­i­den­tial sales and over­all con­sumers’ sen­ti­ments. We have main­tained in the past that the resurrection of the In­dian real es­tate rests on the long-term ben­e­fits of such struc­tural re­forms Shishir Bai­jal, CMD Knight Frank In­dia

are also work­ing on as­set mon­eti­sa­tion like our five-star ho­tels and malls in tier-II cities. This will help us to cre­ate fur­ther liq­uid­ity.

Aditya Ke­dia, Transcon: Trans­parency has al­ways been a key pil­lar in our busi­ness model so it was easy to ad­just to the new sit­u­a­tion. Prior to RERA, our strat­egy was to sell al­most 60% stock be­fore OC and the bal­ance stock af­ter OC; now we are sell­ing only 50% stock be­fore OC and bal­ance will be sold af­ter OC.

Farshid Cooper, Spenta: Our ad­just­ment to RERA was fairly swift largely be­cause we were al­ready fol­low­ing sev­eral of the pro­cesses laid down by RERA. Be it best prac­tices in con­struc­tion, ac­count­ing or trans­parency, the ad­just­ment for us, if any, was min­i­mal. But we were a lit­tle less pre­pared for GST, and fol­low­ing its im­ple­men­ta­tion, we had sev­eral brain­storm­ing ses­sions and set up sev­eral sys­tems and pro­cesses to en­sure a smooth transition and to en­sure that our cus­tomers and sup­pli­ers were also kept abreast with the changes we had de­cided to im­ple­ment. I wouldn’t say that our long-term strat­egy or busi­ness model in gen­eral was dis­turbed or re­vamped as a re­sult of RERA or GST, just mi­nor ad­just­ments to align our­selves with the chang­ing en­vi­ron­ment.

Im­pact on Price

The on­go­ing in­fra devel­op­ment such as met­ros, bridges, air­ports, sta­di­ums, man­u­fac­tur­ing hubs, etc, is giv­ing a fil­lip to the realty land­scapes of mi­cro­mar­kets in many parts of the coun­try. How will this im­pact real es­tate prices in the short and long term?

Dr Ni­ran­jan Hi­ranan­dani: In­fra­struc­ture devel­op­ment helps en­hance real es­tate devel­op­ment not just in mi­cro-mar­kets but also en­hances con­nec­tiv­ity, mak­ing dis­tant ar­eas and lo­ca­tions closer. Pric­ing for real es­tate is a func­tion of de­mand and sup­ply: more the de­mand, the price move­ment will be up­wards; more the sup­ply of right prod­ucts that suit the re­quire­ments, the off­take will in­crease. So, as econ­omy grows and busi­nesses pros­per, a hike in de­mand will be ac­com­pa­nied by price move­ment, which will be in sync with the same.

RK Arora, Su­pertech: The grow­ing con­fi­dence in the sec­tor is ex­pected to pro­vide a fil­lip to in­sti­tu­tional fund­ing, re­sult­ing in an ac­cess to pricecom­pet­i­tive op­tions. This, too, will lead to a ra­tio­nal­i­sa­tion of prop­erty prices across the real es­tate sec­tor. Also, the grow­ing con­fi­dence in the sec­tor is ex­pected to pro­vide a fil­lip to in­sti­tu­tional fund­ing, re­sult­ing in an ac­cess to price-com­pet­i­tive op­tions. Aditya Ke­dia, Transcon De­vel­op­ers: The pro­posed in­fra­struc­ture de­vel­op­ments will bring su­per con­nec­tiv­ity ben­e­fits in Mum­bai. The eco­nom­ics of trans­porta­tion in­fra­struc­ture are go­ing to bring a pos­i­tive hike in sales of real es­tate prop­er­ties.

De­spite be­ing cen­ters of op­por­tu­nity, the cities of In­dia bring with them a host of en­vi­ron­men­tal and in­fra­struc­ture chal­lenges, from pol­lu­tion to lack of civic ameni­ties like drink­ing wa­ter, sewage, hous­ing, and elec­tric­ity. The chal­lenges that this sec­tor faces re­quire the sup­port of all stake­hold­ers. Avail­abil­ity of long-term low-cost fund is still the big­gest chal­lenge for the hous­ing sec­tor Sriram Kalya­nara­man MD & CEO, Na­tional Hous­ing Bank at an AS­SOCHAM event in New Delhi

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