Resurrecting The Sector
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