At the CII conclave held recently, panelists discussed a gamut of issues and trends emerging in the real estate industry, says MENKA SHIVDASANI
When the Confederation of Indian Industry (CII) organised its Real Estate Conclave on June 25, 2010, in Mumbai, the mood was cautious but optimistic. The event, "Maximising Opportunities 2010 and Beyond", had industry experts discussing a whole range of issues from current trends post-recession to new sectors like infrastructure, education, healthcare, retail, office spaces, residential markets and much more.
In his keynote address, Arun Nanda, Chairman, CII Western Region, declared that real estate offered one of the biggest opportunities and the highest growth rates, but there were certainly challenges. "The average project completion time is about four to five years," he said, in the presence of Mr Sachin Ahir, Minister of State for Activities, Housing, Environment, Industries, Mines, Repairs and Reconstruction, Slum Improvement, Social Justice and Urban Land Ceiling, Government of Maharashtra.
"Frequent changes in the government policy on real estate and infrastructure affect the projects adversely," he added. "There is a need of definite government policy on the real estate sector. Besides, after land acquisitions, it takes at least 18 to 20 months to receive all required government clearances. A single window clearance system for the same is also required for speedy clearances."
Rising prices of real estate was also a concern, and as Mr Nanda opined, "With market recovery in 2010, the residential prices have shot up by 30-35 per cent. The industry players should not outprice the market as there is strong demand and hence, tremendous opportunity for many players in real estate."
Mr Nanda pointed out that he had been involved with a number of industries, from oil drilling rigs to car manufacture to the financial sector, and never before had he seen the kind of unlimited demand one could see in the real estate sector. "All you need is the correct product at correct prices," he observed. "You have a golden goose, don"t kill it!"
It was a subject that conference chairman, Mr Anuj Puri had also referred to in his welcome address a few minutes earlier, Mr Puri, who is chairman and country head, Jones Lang LaSalle Meghraj, pointed out that the downturn had taught us all some lessons; "I will not say we have learned them, but we have witnessed them," he added. The primary lesson is that the customer comes first; following closely is the fact that demand is not dictated by supply - the supply must go where the demand is. Mr Puri also spoke about two other essentials for the real estate sector - sustainability and infrastructure.
On the bright side, he pointed out that while the outlook is still cautious, there is no doubt that investors are back.
Mr Sachin Ahir, who is widely recognised as a pro-active and supportive minister, indicated that the Government of Maharashtra is prepared to come up with legislation for making affordable housing facilities available to curb slum dwelling in Mumbai if required.
"The alternatives for effective affordable housing are that the private players take up opportunity or the government intermediates to boost or the government come up with legislation for creation of affordable housing," the Minister said. Mr Ahir also pointed out that the government has extended incentives in terms of FSI for parking facilities and Green solutions in residential projects. "We have created a single window clearance system for SRA projects in the city. We may amend the Township Act to create more residential space through satellite townships," he added.
During a session which tried to provide a macro view of the sector post-recession, Mr Niranjan Hirandani, Managing Director, Hiranandani Group of Companies pointed out the need to produce more homes. He gave the example of a single company in Mumbai, which had decided to hire 12,000 technical people in just six months - giving them all the innate capacity to buy a home.
In the session named ‘Residential Real Estate Markets -Recession or Recess’, panelists threw light on how the residential sector has been the fore-runner in helping markets bounce back.
Regarding pricing Mr. Dharmesh Jain, Chairman and Managing Director, Nirmal Lifestyle said, "Prices, as it has been seen, would get into a cycle run up and developers must be sensitive to the need for rationalising prices... Basically it is the market that would decide pricing and we need to be alive to this need. Pricing and demand would always be an issue but ultimately we are catering to the basic need which must be kept in mind."
For affordable housing, in Mumbai homes between Rs 5-25 lakh cannot happen but homes around Rs 30 lakh are possible. The segment between Rs 5-10 lakh would also have to be considered and the space be created. For this the government has to incentivise projects and earmark developable lands within the city. Leadership is the only way for affordable housing to become a reality as they are doing it in Delhi. Government needs to keep the land pricing within limits by allowing volumes through higher FSI.
Dr. PC Sehgal, Chief Executive Officer, Mumbai Rail Vikas Corporation, drew attention to the fact that housing has to coexist with robust infrastructure and MRVC is trying to expand the suburban rail network, which needs funding. He suggested that a small per cent of stamp duty that is collected from the sale of houses and real estate transactions could come to MRVC through the state government and the developers should push for it as it would be beneficial to their project and push up the property values.
There was a consensus for the need for transparency in dealings. The government bodies, banks and all the players in real estate must come within the ambit of a single regulating body.
On the occasion, CII and JLLM released a report "The Seven Stars of India" - India"s Best- performing Micro Markets for Occupiers" focusing on real estate trends and forecast in seven major cities - Delhi NCR, Mumbai, Pune, Hyderabad, Bangalore, Kolkata and Chennai.
Inputs: Archana Sinha
FREQUENT CHANGES IN THE GOVERNMENT POLICY ON REAL ESTATE AND INFRASTRUCTURE AFFECT THE PROJECTS ADVERSELY
A SINGLE WINDOW CLEARANCE SYSTEM FOR THE SAME IS ALSO REQUIRED FOR SPEEDY CLEARANCES