The real estate sector has witnessed structural changes. Malayappan Murali, CEO and MD, Shriram Properties spoke to BE’s Isha Chakraborty regarding the present situation of the real estate sector.
Q. How do you perceive the real estate sector in India?
A. The country has witnessed a series of radical and transformational reforms in the last few years including demonetisation, the Real Estate Regulation Act (RERA), FDI relaxations, the Goods and Services Tax (GST), and Benami Transactions (Prohibition) Amendment Act. All these reforms will make the real estate sector more transparent, credible, and attractive. We will only see organised players in the days to come.
The process seems to have started with smaller realty developers unable to meet the stricter RERA norms. They are either monetising their land parcels or entering into joint development or development management agreements. These small and marginal players have been reeling under a liquidity crunch because of the market conditions. We can say that with moves like RERA and demonetisation, the unorganised segment of the real estate sector will be wiped out in due course. We can expect a drop in supply, with a significantly reduced number of players. I feel that with strong moves from the central government, the buyer sentiments can expect a fillip and that may generate demand in the market. The steps taken by the government will usher in more equitable and fair transactions between the seller and the buyer of properties. RERA is likely to encourage the growth of organised players and that will further enhance planning, pricing and delivery mechanisms of our sector.
Q. How have the GST and demonetisation affected the real estate sector?
A. Any reform is bound to have initial transitory hiccups. But reforms are inevitable. An industry that adapts to change grows faster. The real estate industry has always been ready for new and progressive policy introductions and the effects of reforms like demonetisation, the RERA, and the GST have been well received by our industry. I feel that the GST norms pertaining to our sector has to mature further and certain compliance related processes need to be refined. But I must also add that the GST has helped to ensure formalisation of the Indian real estate sector and has also been instrumental in bringing down prices for affordable housing marginally due to the input tax credits, which is a welcome change.
Q. What are the different problems that are being faced by the real estate sector?
A. Availability of land parcels with infrastructure at a fair price is the major challenge. Limited or non-availability of urban land is the first major constraint in development of housing and is more prominent in affordable housing. Urban India constitutes about 3.1% of the country’s land area. The pressure is already huge on this limited supply of land. The lengthy approval system is also a major drawback. The real estate developers need numerous approvals and clearances. That extends the time required for the project. In terms of additional cost, delays in project approvals add nearly 25-30% to the project cost. This can be solved by initiating a transparent digital online approval process and by minimising the approval time.
Q. How would you explain the benefits and growing prospects of green certified homes?
A. The benefits of green certified homes are enormous. Many of our projects are green certified. Our experience is that green certified homes have higher demand despite market barriers. Present day consumers prefer greener homes because they save money, conserve resources, and ensure comfort and health benefits. They also fetch greater resale value.
Q. Is the luxury segment a highly opted for segment in the real estate sector?
A. No, the luxury housing market forms a miniscule per-centage of country’s housing demand. Luxury housing caters to a specific segment, which is not large. Housing deficit is a perpetual phenomenon in India. In the luxury segment, this deficit is the least. Housing demand is highest among Economically Weaker Sections (EWS) or Low Income Group (LIG) and in the middle income segment.
Q. What are your ongoing projects? Do you have plans for expansion?
A. Our growth pipeline is strong. We remain focused on the mid-income and affordable segments. We have put together a strong pipeline of projects that should support our growth momentum.