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An Uneasy Calm - Economic Times 7th August 2008

The current slowdown is nothing but a knee jerk reaction to unrealistic prices

Chetan D Narain

With growth in economy and changes in policies we see several real estate related conferences and events held across the country from time to time. I had the opportunity to recently moderate (chair) one such event organised by Marcus Evans at the Renaissance Powai on July 24 and25.
It was a two-day event, with a variety of speakers; HIRCO represented by Mr.V Suresh, Lavasaa from Pune by Mr. Rajgopal, Dr. Prem Jain of The Indian Green Building Council, Mr.Ved Prakash Chaturvedi of Tata Asset Management, my knowledgeable brother Sanjeet D Narain, Jayesh Kariya of Deloitte, Haskins and Sells, Mr. M Murali of Shriram Properties - Bangalore, Mark Dunson of India Emerson Climate Technologies (who were also the key sponsors), Nischal Joshipura of Nishith Desai associates amongst other esteemed speakers and attending guests.
With a spectrum of speakers representing topics related to real estate affiliated products and services, one gets an overview of the current industry practices, issues and solutions related to the same.
Day one started with 'Emerging concepts in Town development' by Mr.Rajgopal of Lavassa (Pune) where he spoke about sustainable living at reasonable costs without compromising on "Lifestyle". Also how a well balanced mixed use township which allows affordable housing and affluent living will help decongest cities.
Session two was the hot favourite "Outlook on India's Real Estate Sectors; Commercial, Residential, retail and Industrial" covered by Mr.Ved Prakash Chaturvedi, Sanjeet Narain and my humble self. On the commercial and residential front we felt that there is resistance at this point and the slowdown is nothing but a knee jerk reaction to unrealistic prices. On the retail front we discussed the number of malls springing up across the country and the reality behind how many are actually running successfully. Also how the percentage of organised shopping is currently at 3 to 5 % levels and poised to grow.
To conclude this session we agreed there is no "Falling of Prices" but what we are witnessing is a "Correction". Dr. Prem Jain bowled us over with a discussion on "Green Building" concepts. He spoke about various standards set by the Indian Green Building Council, India. First is a green status, then silver, gold and platinum, each defining their commitments towards the environment and planet. Greening existing buildings to improve energy efficiency practical renovations and attention to operations and maintenance practices can reduce costs, increase returns and improve environmental performance.
Back to back we had Mark Dunson, who spoke almost on similar issues but focussed on airconditioning as that's what Emerson Climate technologies are best known for. His topics varied from Ozone depletion and global warming and its impact on the facilities business, energy consumption and efficiency in commercial facilities, its trends and air-conditioning technology -trends which gave us an insight into what the future holds for us.
The post-lunch session by Nischal Joshipura explained the principles behind the implementation of regulatory policies to safeguard India's property boom. He also explained how various international funds, whether Foreign Direct Investment or Private Equity route their funds in a tax-efficient way. Next we had Mr. M Murali, who spoke very passionately about deal flow, pricing and client expectations in today's market. For the first time in my 20 years in real estate, I heard a developer saying that he will be happy to see a correction of up to 20 odd per cent, which allows people to buy and create a more healthy environment and we could not agree more.
Mr. Murali also informed us about the JP Morgan Land deals report stating deals totalled to Rs.23,000 crores ($5.7 billion) in the 'First Quarter' of 2008, most of the huge deals predominantly happened in Mumbai and Delhi and respective suburbs such as Noida and Gurgaon (in excess of Rs.5000 crores) and in Mumbai MMRDA Bandra Kurla complex (Rs.4000 crores). The Indian real estate sector is said to balloon up to @140 billion by 2012 up from the present level around $50 billion.
Day two started with a session on REITs by Jayesh Kariya, who outlined a broad overview of REIT's - meaning and types of REITs, advantages of REITs, present trends, why REITs etc. He went on to cover the investors’ perspective and tax scenario and comparative analysis of REIT across the globe. His session was followed by Mr.V Suresh of HIRCO who illustrated a case study on creation of an integrated and selfcontained township - the Hiranandani experience.
The session after the refreshment break was a panel discussion headed by Dr. P. S. N.Rao of NAR - India on urban planning and real estate development. During the discussion they examined residential and nonresidential real estate markets from the perspectives of both macro and micro-economics as well as the role of government in real estate markets. Also covering challenges in urban planning and exploring town planning matters from both development control and property development angles.
Sunil Rohokale, MD & CEO of ICICI home finance, took on the floor next speaking on investment risks in real estate from a financier or fund perspective. After a lunch break we had a session on opportunities on investing in real estate globally by Jasraj Thakur of ING investment followed by a case study on creation of world-class Mumbai, while leveraging on redevelopment of old and dilapidated building by 'Lalit Gandhi', CMD of Lok Housing.
The last session of the day ended with one of the least tapped but highly profitable businesses in the service sectors in Real estate - Facilities management. Rajat Biswas, director of facilities at Ansal Properties (Delhi) covered; the number of new facilities is constantly growing as well as the quality. Property owners are conscious of professional maintenance needs because it helps to increase the building endurance period and market value.
To conclude, the event allowed folks to gain knowledge on current trends and get an insight in what lies ahead in this slightly 'uneasycalm' that we feel within the market.
CHETAN D NARAIN IS PRESIDENT,
AND CEO - NARAINS CORP AND FORMER PRESIDENT INDIA INSTITUTE
OF REAL ESTATE