Anuj Puri, Chairman, Anarock Group setting the tone of the discussion started, “If you were to look at mature markets such as the USA and China 25% - 30% of the GDP is driven by the real estate sector. In India, we are at 11%. We are trying to see if this can be reached to 20 - 25%, the way current government has put together the norms and revised regulations."
Boman Irani, Chairman & MD, Rustomjee Group added, “In the property expo held recently, we saw the highest number of walk-ins this year since 2015. The educated buyers understand that interest rates going up is not perpetual and the average of 7-7 ½ percent is in acceptable limits given the loan tenure. Inflation itself is going to out price the property in-times to come. During the pandemic, we focussed our available resources on the projects that were easiest to complete and were close to fruition. The other thing we did was speaking to financial institutions, asking for money and assuring commitments. We did give returns to investors who wanted an exit too. Relationships cultivated in the past helped us during the difficult times and keeping a long term perspective helped us prioritise and not panic.”
Mohit Malhotra, CEO & MD, Godrej Properties stated, “I strongly believe that we are on a very positive up cycle lasting another 8-10 years and we are at the start of this major upcycle. The reasons are obvious - Indian economy is expected to grow between 6-8% despite global scenario, the growth of urbanisation in the cities is going to continue at a rapid pace and affordability is at an all-time high as property prices have not risen significantly over the last few years. Covid has fundamentally changed how consumers look at homes and this phenomenon is here to stay. All these factors give major confidence. are on a major upcycle and despite these headwinds which are coming from the global markets. Three major long-term trends I see in this industry is that consolidation is going to accelerate because the fundamental nature of the business has changed in the last decade. From becoming the low equity business it has become the high equity business after RERA so ability to attract capital is going to be the key to survive in the industry. We will also see mega developers emerging building huge numbers of projects across India. Lastly, India would see tremendous growth in multiple cities. The Tier 2 cities will start to rise and all the major developers in India will eventually become national developers in the next decade.”
Parth Mehta, Founder & Managing Director, Paradigm Realty expressed his views, “Before Covid the affordable luxury housing segment in Mumbai was between 75 lakhs to 1.5 crore. Post Covid homebuyers are ready to pay 20-30% higher than their budget for a larger space. There also has been a shift in the budgets as costs are going up and inflation is high. A developer what he was selling two years back, will not be able to deliver the similar product at the same price point. The ready inventory has been consumed and today there is more or less a price parity between a large and a small developer in any micro market and there is no rat race to sell. Many of the Tier-2 and Tier 3 developers would bring down the price and try and sell but have subsequently suffered in delivery.”
Ritesh Vohra, Partner & Head - Real Estate, Investcorp India Asset Managers Pvt. Ltd shared investor perspective, “India is the bright spot in the global sense of gloom and doom, but having said that if you look at foreign investment in Indian real-estate, for the last 5-6 years approximately USD 4 - 5 billion is coming in every year and that too in commercial real estate. They don’t want to take risk in development projects and then there is currency play that comes in. An investor will need 30-35% IRR to justify taking an exposure into development projects which do not exist. However, much has changed from evolutionary perspective whether it is regulatory framework, the market depths, the quality of developers or track record of delivery. Investors have also learnt. Most of the money that comes to India is relatively hedged products. Large commercial office is a risk free investment. In warehousing we manage about USD 45 Billion globally and warehousing is our single biggest or the strongest theme across geographies. We see a long runway ahead for the warehousing sector. Warehousing is where offices were 10 years ago in India. Demand and supply and regulatory structure all of that is coming in. Equity in residential is still difficult especially when you are looking at foreign investors and dollar capital, as return expectations are high because of the perceived risks.”
Subodh Runwal, Managing Director, Runwal Group made a point, “In India for the next 3-5 years we are in a very sweet spot. The homebuyer trends keep changing and we can’t generalise them. There has been phenomenal interest from NRIs as they are not seeing many opportunities abroad for investing. In addition, the strengthening dollar makes buying property in India much cheaper and they are going to only the credible developers. The NRI market is there and we are quite bullish about this segment. Most importantly, we need to bring affordability back in real estate. Affordable housing cannot be in far flung areas. Something as simple as reducing government premiums will bring housing costs down. Today as a developer 80% of the time go in addressing regulatory or other challenges and only 20% to designing a product and making sales. If we can get an elbow space to create a good product we as developers are happy to spend more on the construction area, planning, designing with no intent to sell those extra spaces. This city can have landmarks like Shanghai or Dubai or any other international city. ”
Prioritise projects that are going to come to fruition quickly. Relationships built over a period of time help when the times are bad. Keep communication open and transparent with all the stakeholders to avoid panic and misunderstanding. Have a long term strategy for the business rather than a short term view to be successful. Anuj Puri
Most mistakes are done in good times. In bad times everybody is very cautious. One of the biggest mistakes developers made was to deploy capital wrongly which hurt them in the difficult times and in the long run. Mohit Malhotra
China is often cited as an example for real estate growth and they have indeed gone through a fabulous growth trajectory for the last 20 years. Sales have grown 100x but the challenges are becoming evident especially now because of China’s over reliance on the property sector. Evergrande is the second largest developer in China. Their outstanding debt is USD 300 Billion. For the country to deal with debt of this scale will take at least 10 years, which will be a lost decade for China's property sector. So I believe there is some demerit in excessive growth. Ritesh Vohra
Going forward, developers that are conservatively optimistic will do well. Housing is going to be at the forefront of Indian real estate growth. In the last 6-7 years that were challenging for the sector, we focused on delivering projects on time rather than making profits. This has helped us establish our company as a trusted brand and will be an advantage in the highly competitive times coming ahead. Parth Mehta
Look at any other industry, banking, FMCG, Auto etc, they pass on the cost to the customer. Real estate is the only industry that absorbs the costs. If you analyse the balance sheets of any listed players you won’t see a return 10-15% PAT. Gone are the days of huge margins. Subodh Runwal
Smart developers are giving incentives like interest rate cushion, payment schemes etc. which are working out quite well. I see this trend continuing. You have to move the narrative where you want it to achieve growth. During Covid most of the developers were focused on finishing and delivering the projects that were 70% or more complete, rather than trying to complete all projects at one time. Boman Irani