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June 2021

Power ‘Sustainable Living’ through ‘Green’ real estate development

Dr. Niranjan Hiranandani, co-Founder and MD, Hiranandani Group.

India, as part of a growing economy, needs to accelerate its low-carbon future transition. There is a huge war cry on carbon neutrality and net zero emission on the climatic front. This nudges Indian economy to set a short term and long-term pledge for being carbon positive with predefined sustainable development goals. The goals will be designed to act as a blueprint to achieve a sustainable future for all. India needs to work at a sectoral level for achieving carbon neutrality. Here lies a huge opportunity for Indian Real estate sector to claim its leadership in lowering carbon footprints at each stage of urban development.

Real estate and Construction Industry lays its sustainable goals on the world environment day 2021 for ecosystem restoring. Adopting innovative global best technological practices to ‘Reuse, Recycle, and Reproduce’ will pave the way for sustainable living and growth. Real estate development needs to strike a balance between the development roadmap & mitigation mission to fine tune the balance between how we urbanize and how we industrialize. The World Bank estimates, the real estate sector must reduce CO2 emissions by 36% by 2030. Real estate sector must calibrate its sustainable investment to achieve sustainability targets. It is important to place high priority on becoming environmentally sustainable. The industry should step forward to make a conscious set of sustainability principles and develop a community that dedicatedly adopts such initiatives. The sector needs to imbibe sustainable building practices and emphasize on making green building practices more prevalent. The Engineers, Architects and Planners can take a lead in facilitating a sustainable urban future. The desire to create more self-sustainable spaces with best environmental practices will reconcile the need to create more ecological balance, address the impact of climatic issues and wellbeing of occupants. The developers can play a pivotal role in building sustainable urban spaces with renewable materials, natural topography, more social and environmentally friendly practices that shape the future living.

Ideally, sustainable urban development through an eco-system should be made up of urban planning, smart cities development, affordable housing, urban flood management, sewerage and wastewater management, rainwater harvesting, urban transport - including intelligent transport management systems - transit-oriented development and multimodal integration and disaster resilient development. Taking this to the logical next level is where the foundation of sustainable real estate development starts.

Real estate construction can adopt innovative raw materials that are eco-friendly, whereas Planning and Architecture must plan the structures that allow natural light and ventilation, which will reduce the need for electricity powered luminaries and HVAC systems in the daytime. Innovative construction materials should be used to reduce carbon emission and balance heat emission. The real estate development should consist of planning for rainwater harvesting, sewage treatment, water treatment plant, solid waste management in all the projects to make the development self- sustainable and be eco-friendly in nature.

India Inc needs to strategize and practice conscious consumerism in each aspect of the project development. This involves conscious development, sustainable measures, environmentally friendly practices, social responsibility which encompasses necessary support socially, philosophically, and ethically. According to Nielsen, sustainable product sales have increased by nearly 20 percent since 2014. This indicates growth in awareness and concerns for ecology restoration among the consumers. Housing can be developed with more sustainable materials, adopt more green building features, and support the ecosystem.

The new-age homebuyers are well informed, and they prefer sustainable living by mindful consumption. Real estate developers need to be more thoughtful in their green policy and allocate budget and resources to achieve ecological targets. Homebuyers post pandemic life have underpinned the value of open spaces, green corridors, natural ventilation with more sunlight, home garden spaces as some of the preferred luxury for their personal abodes. Also, the luxury to enjoy uninterrupted water, power and internet supply is due to sustainable amenities offered in the projects by the branded developers that gained traction post pandemic era.

The redesigning of product board is inevitable by the developers to cater the emerging choices and preferences of the discerning homebuyers. Use of energy-efficient lights, growing their own greens in kitchen gardens, buy local, ensure waste is composted and used as manure, as also making efforts to reuse, recycle and replenish. These are not just poster children for eco-friendly real estate development and end-use; these are environment-conscious citizens for whom, causing least possible damage to the environment has become a way of life. They follow trends that improve their way of living while also protecting the planet. They live in sustainable habitat, which is created by real estate development which does not harm the environment and is positioned in an urban conglomeration which has been planned to promote sustainable living.

Developers need to re-align to these goals and adopts best renewable environment friendly practices in sync with nature. The challenge for us on this environment day, is figuring out how we can achieve this across a wider spectrum. It is a matter of choices: choose to be environment friendly. Wok towards being a ‘conscious consumer’ – sustainable living can, and should, become our way of life.

Demand for affordable homes costing below INR 1 Crore

As per Knight Frank research, homes costing INR 1 crore or less have been finding more favour lately, with this category taking 70% and 62% of total new sales in April 2021 and May 2021 respectively. What could be the main reasons behind this trend ?

The trend in report, reflects demand in affordable housing that is further aided with additional impetus by the government. Pandemic life has made it prevalent that new age millennial home buyers who opted for rented apartments in lieu of job migration has underpinned the significant value of owning a home as safety net. This shows that the Affordable Housing segment is witnessing high quantum of sales and seeing growth as discerning home buyers are looking homes that fit the price band of Rs 1 crore in the choice of location.

Why are Mumbaikars buying homes costing INR 1 crore or less?
It is a natural reaction of Millennials and those who used to stay on rent realizing the advantages of one’s own house especially during the pandemic across India. Having said this, let me add that it is not a situation where all segments of home buyers are opting for homes within the Rs. 1 crore price band; these comprise largely first-time home buyers.

The real estate market has also witnessed a surge in sales of larger and luxurious apartments, post pandemic in the ‘new normal’. This is driven by segment which feels the need to upgrade to bigger houses, and larger / luxury home buying by this segment is a trend which has also gained traction.

Affordable Housing within the Rs. 1 crore price band remains more attractive for salaried professionals who realize the advantages of having one’s own home post the pandemic, vis-à-vis rented apartments. In some projects, benefits of schemes like PMAY-U and CLSS schemes enhance the advantage and have resulted in higher numbers of home buyers in this price range.

In your opinion, which micro-markets/areas in Mumbai are seeing the maximum traction in the price bracket (INR 1 crore or less) and why? Market trends suggest that suburbia locations like Thane and Panvel realty market will augur well for emerging home buyers. The slew of mega infrastructure chalked out on the development board will catalyse the growth of these preferred corridors.

It is the right time to buy in either of these emerging suburbs, given growth in ‘remote working’ and ‘hybrid work culture’, with the commute gradually becoming a lesser consideration factor for home buying.

Also, buying a home in these locations at attractive price points today will help reap appreciation benefit in the long run. Both these markets have a range of configuration available to cater to varied customer needs. Plus, the rising presence of branded developers in these satellite cities signals a positive future prospective.

More than 80% prospective buyers ready to buy a house if stamp duty charges are cut, reveals Magicbricks Consumer Poll

Property registration and stamp duty charges range between 5%-9% on an average across the country and adds significantly to the overall cost of the property and acts as a deterrent to many first-time home buyers.

In the latest poll conducted by Magicbricks, an overwhelming 83% of the respondents feel that a cut in stamp duty would prompt them to buy a house.

The month of March 2021 had seen a record spike of 2.13 lakh registrations, witnessed 114% rise in housing sales during the period of stamp duty cuts, between September 2020 and March 2021. But ever since the expiry of the stamp duty period, we are seeing a constant dip in sales.

After the Maharashtra government restored the stamp duty rate to 5% from April 1, 2021, property registrations have seen a dip of over 50% in April we notice a constant demand for housing and loans, in both mid-segment and luxury housing. With Work-For-Home emerging as the new normal, people are looking for bigger size houses with an extra room and hence the state government should look at giving stamp duty holidays that would lessen the burden on homebuyers.

Many real estate bodies like NAREDCO and CREDAI have been advocating for stamp duty subsidies and more states are expected to follow Maharashtra’s stamp duty model.

Effect of second wave on job creation in Real Estate

Dr. Niranjan Hiranandani, National President, Naredco

With the second wave of Covid-19 pandemic impacting all the sectors including real estate, uncertainties related to jobs and income have caused the economic slowdown and impacted the sentiments of homebuyers too. Real estate is a sentiments driven sector but the demand for housing going to go up, considering the experiences of the first lockdown where it was seen that a shelter or house is a basic necessity.

Amid these challenging times and uncertainties, buyers’ trust in real estate assets has become stronger. They need a house which can meet their requirements to accommodate work from home needs, children online classes and their leisure activities since they are spending more time than ever at homes now. There will be price appreciation in the long run as the materials cost have gone up significantly, but there should not be any major price hike in the short term.

The government has taken significant steps to curb the pandemic impact, such as reduction in stamp duty, offering moratorium in the first lockdown and extending RERA timelines. However, the second wave has been more severe than the first one, so the expectations are that the project completion timelines under RERA are extended, re-introduction of ICT in GST, online environment approvals, rationalisation of raw materials prices, extension of the PMAY scheme among others can bring relief to the sector.

Finalisation of Delhi Master Plan 2041

REACTION

Draft Delhi Master Plan 2041

Dr. Niranjan Hiranandani, National President, NAREDCO said, “With focus on tackling pollution and urban development, the Draft Delhi Master Plan 2041 is a roadmap for the future development of Delhi. The draft not only assesses the present condition of Delhi, but also works as a guideline to achieve the desired development,” he said.

With a more pragmatic use of existing industrial areas, with thrust on services sector, IT, tourism and hospitality, the draft focusses on ‘housing for all’ as well as measures like ‘refuge points and self-sustained isolated residential areas to deal with pandemics. “The ‘new normal’ in a world where humankind co-exists with Covid-19 has brought into focus the need to create self-contained and mixed-use areas with decentralized infrastructure, which augurs well for Delhi’s housing scenario, in the future. The draft envisages peripheral areas as the new housing zones, as a result of land pooling and green development initiatives. It also maintains focus on urban regeneration and densification in the city centre and around transit corridors with rental and small format housing,” he said.

Lauding the key features of the Draft Master Plan, Dr. Niranjan Hiranandani listed focus on ensuring a greener environment and Yamuna cleaning as right steps, taking the future Delhi to becoming eco-friendly. Enhanced mobility promoting cleaner fuels and focus on areas such as IT, service sector and hospitality will play a major role in enhancing the city’s lifestyle and living standards. Addressing housing needs of the poor and rejuvenation of the heritage fabric of the city are among features which will ensure ‘inclusive growth’ of the city, going into the future,” he concluded.

Future of Affordable Housing

The second wave of Covid-19 pandemic has brought new challenges before us however we are upbeat about the demand for housing across all segments. However, it is difficult to assess exactly when and how quickly recovery will take place. Housing is a basic need for one and all, and it is the one segment in which demand is always greater than supply. In the past and currently we have seen that living in owned homes is a better alternative than in rented accommodation. This is one reason which should result in an increased demand for housing once the pandemic situation settles a bit more.

Hopefully, India will certainly emerge victorious out of this pandemic and demand for homes is also going to rise. However, all segments including affordable housing will take time to return to pre-COVID levels. Since affordable segment is price sensitive therefore its full recovery depends upon several factors including how end-users find themselves into a positive where they cannot worry about their jobs situation and easily borrow home loans to buy their dream homes. It is also viable if the PMAY scheme is further extended for all categories so that more first-time buyers can be subsumed under this wonderful initiative where we aspire to provide housing for all by 2022. This will also prepare both builders who can construct more houses and buyers who wish to have their own houses.

This pandemic made everyone realise the importance of their own home. Currently, across all segments, this experience will certainly boost the demand. Millennials acknowledge the fact that own housing is of utmost important for they are working from home. Many first-time buyers who have faced challenges related to housing in the pandemic times would now focus to buy a house near their workplace this would result in traction in not just affordable housing but other segments as well.

Creating ‘Value Offices’ for the #FutureOfWorkin the post - pandemic era

Creating ‘Value Offices’ for the #FutureOfWorkin the post - pandemic era

- Dr. Niranjan Hiranandani, MD, Hiranandani Group and National President - NAREDCO

Indian real estate has been disrupted with structural policy tsunamis and covid19 brought the sector to a grinding halt. The complete economic lockdown led to work from home and remote working options impacting the commercial real estate. However, a media reports found that as the economy gradually opened up in Q3 2020, business activities resumed and the Indian office market began witnessing gradual recovery. Project completions grew by 59% and net absorption increased by 63%, as compared to the quarter earlier. This momentum was sustained through Q4 2020 with a net absorption of 8.24 mn sq ft, an increase of 52% when compared to the third quarter.

However, the Q1 of 2021 was sluggish comparatively owing to the advent of the second Covid- 19 wave in the country. Yet, the sector has always been resilient. In fact, the country launched its first REITS during this unprecedented crisis of Coronavirus followed by the Union budget 2021 announcing liberal policies for investment by foreign portfolio and institutional investors. As per the recent media reports, the Indian realty PE investments jumped 16 times on-year to $3.24 billion in March 2021. This not only highlighted the potential of the Indian commercial sector but also created some rippling effects of positivity in the economy.

Mumbai presents a myriad of possibilities for investment and growth to NRIs, HNIs and corporate investors within its commercial districts. The MMR market has around 100 mn sq.ft. of office assets out of which leading players have developed a major deal which includes the Hiranandani Groupthat has developed and delivered around almost 12msqft. However, as the city witnessed linear growth in terms of geographical boundaries, infrastructure, and trade, it continued to attract a huge influx of migrating population on the back of rapid urbanization. This led to the need to decentralize and decongest the commercial hot spots.

The Future of Work is now expected to be very different to that of the pre- pandemic era. Trends such as “Work, Live and Play” and “Walk to work” continue to gain traction steadily and Mumbai, as India’s commercial capital, needs to be able to accommodate that. The mounting success of the city adds to the active working population, skyrocketing property prices etc. while compromising the liberty of space, aesthetics and additional amenities. This has nudged the developers to explore the new suburban districts wherein corporates began to dabble with the concept of value offices and satellite offices in sync with the growth of residential real estate. As a result, the city witnessed the ‘rise of suburbia’ in the peripheral satellite towns and metropolitan regions like Andheri, Malad, Thane, Navi Mumbai and Panvel.The government's push to improve connectivity, slew of infrastructure projects announced further augmented the development. Today, suburbs like Thane have emerged as a preferred commercial destination due to the advantage of parallel connectivity, good commercial offerings, attractive price points, leisure of large spaces for expansion and favorable social-civic infrastructure to offer value offices.

Respected and valuedplayers with a rich legacy in commercial real estate development offer the modularity and scalability in commercial office spaces at these suburban hotspots. The idea is to create a commercial business park is part of the thriving social ecosystem making it lucrative post pandemic life. The location is expected to be selected while placing significant consideration on well-planned roads, designated pavements, green cover, robust power and internet supplyand aspects of sustainability. These kinds of offices,also called ‘Value Offices’, maximize value for customers, employees, stakeholders, and society on a continuing basis.These kind of commercial properties are largely gaining traction due to the availability of tech-specs like advanced CCTV surveillance, architecture and interior décor, presence of high-speed elevators, Service Elevators and Parking Elevators that bring ‘Ease of Working’.

Another aspect that is quickly gaining traction and today, also a key influencing factor in purchase of a commercial space is the ecosystem around the located property. The socio- civic fabric of the location contributes a great deal to the purchase decision and in fact, to the overall productivity of the company. Having a hospital, high street retail and other recreational amenities allows employees to either bond outside of work or carry out personal responsibilities at their convenience.Integrated township developments which encompass these features are the most suited places for the 'Future of Work'.

The new normal will require commercial real estate players to foster the needs of corporates, entrepreneurs and even budding professionals. As trends of “Walk to Work” and “Live, Work and Play”become the reality of tomorrow, the sector needs to jump on the bandwagon by creating a progressive ecosystem that enhances the living quotient of residents and the working quotient of the workforce operating from here. This is an added value proposition offered to build value offices.

GDP Outlook Q2 2021

Dr. Niranjan Hiranandani, co-Founder and MD, Hiranandani Group said, “Re-boot of the economy post the lockdown of 2020 saw different industries move at a different pace; in real estate, the housing segment, saw the fastest recovery. This was driven by a number of factors; in Maharashtra, the stamp duty rate revision for a time bound period gave the recovery process a major boost.”

“Housing sales grew month on month, and there was no denying the positive impact which the stamp duty rate reduction had on the same. Effectively, reducing the stamp duty rate resulted in the state government getting more revenue than in the previous months; for the home buyer it was the ‘tipping point’ between being a fence-sitter and an actual buyer,” he added.

“In the aftermath of the scheme not being extended, we have seen the impact on sales. The second wave, has impacted not just the economy but also home buyer sentiment; and any move that brings back positivity – including reduction in stamp duty rates – will play a major role in boosting sales and ensuring that home buyers are safe in their new homes in the ‘new normal’. While we work towards vaccinating India’s population, ensuring herd immunity and returning to ‘near normalcy’, positive moves like stamp duty rate reduction will obviously boost sales in housing,” he concluded.

Impact of Model Tenancy Act on Real Estate

Apart from being a basic need, Housing in India, is always in demand – and it happens to be a state subject. So just like RERA was a Central enactment and each state has its own version i.e. MahaRERA for Maharashtra, the Model Tenancy Act has been approved by the Union Cabinet, and will be circulated to all States / Union Territories for adaptation. This is to be done by way of the State or Union Territory enacting fresh legislation or amending existing rental laws suitably.

The new legislation or amended rental law which each state will implement, will help overhaul the legal framework with respect to rental housing across the country. Rents have remained static for decades; there are various other challenges which have resulted in rental premises not getting their due place in the overall real estate scene. The new legislation/amended law is expected to spur overall growth of rental housing.

On the assumption that the States and Union Territories do the needful and implement the Model tenancy Act, the impact will be felt on investor owned residential stock which as of now is vacant and locked up. In effect, this segment – investor owned vacant homes will open up for tenants. So, home seekers will get shelter, the owner will get returns on investment (RoI) and it will reduce burden on the micro-market’s demand side.

Whether this will result in rentals going down will depend upon the situation across different micro-markets; as also the demand/ supply equation. Logically, enhanced supply of rental housing should impact rentals in a manner that is positive for tenants.

On the legal aspect, the advantage of the Model Tenancy Act adaption by States and Union Territories will be clarity in terms of the obligations and responsibilities on part of landlords as also tenants; so the aspect of legal disputes should reduce; as also we expect time-bound redressal in instances where legal recourse is resorted to.

From the industry perspective, it is expected to give a fillip to private participation in rental housing as a business model, one that will address the huge housing shortage. The Act will enable institutionalization of rental housing by gradually shifting it towards the formal market.

In conclusion, the solution to ever increasing demand for housing is not just by owned homes; rental housing can also play a major role in this regard. Existing rental laws have not inspired confidence among landlords or investors; as a result rental accommodation has not grown in the quantum it should have. With the Model Tenancy Act addressing these issues, it should result in better days ahead for rental housing.

Dr. Niranjan Hiranandani, National President, NAREDCO

Impact of Rising raw material prices on housing price

Rising Input Costs – Challenges, Impact and Way Forward

The prices of key raw materials like Steel, Cement and Bitumen have increased significantly in the last one year in India. This is posing several challenges to various sectors, including Infrastructure, Real Estate, etc., which are still suffering from after-effects of COVID-19 pandemic and resultant lockdowns.

Increase in Price of Steel: The price of various grades of steel have increased in the range of 60% - 100% between July 2020 and May 2021. After the price hike announced in May 2021, the price of Hot Rolled Coil (HRC) has increased to Rs 72,000 per ton, the highest since 2008. The price was around 100 per cent higher than that of July 2020. Furthermore, the prices are expected to increase again in next few days. As the steel prices are on a continuous upsurge, it has put majority of players from Auto, Construction, Real Estate etc. in a tight spot. Following table shows the increase in the price of steel:

DOMESTIC HRC PRICES IN WHOLESALE MARKET
S. No. Month/Year Price (Ex – Mumbai) (Rs./Ton)
1. July, 2020 36,500
2. August, 2020 39,800
3. September, 2020 41,200
4. October, 2020 42,800
5. November, 2020 45,900
6. December, 2020 51,000
7. January, 2021 58,000
8. March, 2021 53,500
9. April, 2021 60,000
10. May, 2021 72,000

Cement Price Increase: The price of cement has increased by over 50-70 per cent from 2020 to 2021. The average retail price for a bag of cement is currently Rs. 420 a bag whereas the same in FY 2020 was Rs. 280. This price is likely to increase further in the coming months.

Key Suggestions:

1. The export of steel should be banned for two years, till the issues regarding high pricing and availability in domestic markets are resolved. China has completely removed VAT rebates on exports of 146 steel products to ensure availability of steel to domestic consumers.

2. Prices of steel and cement should be regulated; till the time the supply is restored in the domestic market.

3. The import duty of steel should be reduced from 7.5 per cent to 0 per cent for a period of 2 years.

4. Usage of Cement of imported origin should be allowed.

Increase in Penetration of leading players in Tier 2 and Tiear 3 cities

Realtors Forum: Increasing high street penetration of leading players in tier 2 & 3 cities due to high revenue potential. What’s your take on this?

The biggest plus point that High Streets offer is existing footfalls – and the numbers of potential customers, usually, are high. Another advantage is that outlets in High Streets work at lower cost of operations, and time taken to commence operations in such locations is low.

Media reports quote a report by Anarock Retail as saying that between April 2020 and May 2021, of the categories which closed transactions for high street spaces, apparel accounted for 23 per cent, F&B had a 15 per cent share while jewellery had 12 per cent share. Hypermarkets and supermarkets were among other lessors of high street spaces, although these were more in tier 2 and 3 cities.

The reason why retail is moving to such locations is simple: there has been huge pent-up demand over the past few years which was not being met in such locations. Tier 2 and 3 cities are the new growth destinations for high street retail, especially as work from remote location as also the hybrid work system has seen customers of these retail outlets make the shift from rented accommodation in Metro and Tier 1 cities back to their homes, in Tier 2,3 and a select few Tier 4 cities as well. So yes, high street retail is growing, space is being picked up – and Tier 2 and 3 cities are favoured locations for retail giants looking to expand and grow.

Dr. Niranjan Hiranandani is National President, NAREDCO

New Propety launches in peripheral cities for FY21

As per ANAROCK's latest data, as much as 58% of about 1.49 lakh homes launched in FY21 are in the leading seven cities’ peripheries. What are the primary reasons driving this trend?

In the ‘new normal’, homebuyers have opted for peripheral areas of the leading seven cities, as they have residential real estate options which are affordable and offer a wide choice of homes.

The ‘remote work’ culture has done away with the hassle of commuting, and nudged homebuyers to opt for larger sized homes in satellite towns. These micro-markets offer better planning and infrastructure in supplement to the well-developed social fabric.

Housing options in these locations also offer price appreciation benefits in the long run. Home loans at historic lows add to home buyer’s willingness to buy homes in peripheral regions, where the equation is simple: spacious apartments at attractive price points, plus ample green, open spaces.

With the majority of the new supply directed in the peripheral regions do we see people moving from city centres to peripheral regions? If yes, why? If no, why?

The report talks about seven urban conglomerations, where traditionally, the city centre – the Central Business District (CBD) was important when it came to buying a home. The ‘new normal’ is characterized by remote working options, the second wave and the expected third wave have only ensured that this continues for some time in the near future.

The resulting trend of ‘work from home’ reflects in home buyers opting for homes in peripheral regions. Assuming the vaccination process works out and herd immunity works out, humankind will still opt for decongestion and decentralization. In turn, these will accelerate the desire in the post pandemic life the need to have a safe environment and maintain social distance.

The remote work culture has opened up opportunities for house hunters to look for spaces in peripheral areas and satellite towns. These offer better quality of life with work-life balance and a holistic ecosystem, mostly with township living. This works out due to land availability, as also ample open, green spaces.

From the real estate developers’ perspective, land availability in peripheral areas is cheaper than in metro cities. The Unified DCPR in Maharashtra ensures it equal development opportunities for developers when they explore such locations.

When people go home-buying now – what are the top priorities they are keeping in mind?

Home seekers in the ‘new normal’ want homes that offers safety, security and stability. The homebuyers preferences have inclined towards township living which offers holistic lifestyle , open green ecosystem and like-minded community living. The sustainability is another important yardstick that house hunters gauge to zero down on their choice of dream home. The new age buyers prefer a wholistic surrounding with well-defined connectivity and infrastructure development that offers ease of living. Above all, the significance to opt for ready to move in homes from the branded developer with proven track record and financial stability is supreme.

Finally, home seekers want homes in projects which have approvals and documentation in place, are RERA registered and of course, offer a value proposition with competitive pricing.

Which micro-markets in the peripheral regions will witness maximum traction in the upcoming quarters?

If one considers the Mumbai Metropolitan Region (MMR), two micro-markets show maximum promise: Thane and Panvel. Both these locations have a slew of infrastructure projects coming up, which will be a big game changer, a few years down the line.

It is the right time to buy in either of these micro-markets, given growth in ‘remote working’ and ‘hybrid work culture’, with the commute gradually becoming a lesser consideration factor for home buying.

Also, buying a home in either of these locations at attractive price points today will help reap appreciation benefit in the long run. Both these micro-markets have a wide range of configurations available, to cater to varied customer needs. Plus, the rising presence of branded developers in both of these signals a positive future perspective.

Dr. Niranjan Hiranandani is National President, NAREDCO

On Rebuilding of Indian Real Estate during covid times.

1. How is your sector facing in this lockdown, the reviving measures taken to rebuild economy, Rebuild India?

Real estate sector is indeed facing a challenging time with twin assaults. The pandemic induced lockdown has resulted in shortage of skill labour , Liquidity crisis, shortage of essential raw materials which has impacted the cost of construction on the higher side . The situation looks grim on the back of muted demand & lack of fiscal impetus. The sector contributes around 7 to 8% of the country’s GDP and is the second largest employer in India. The revival of the real estate sector will have a multiplier effect on 270 ancillary industries. The turnaround of the sector is imperative to ensure its survival and deal with the pandemic crisis.

Industry pegs hope on government timely measures and radical steps to recoup the estranged labour intensive sector of the economy. Many of the industries like hospitality, tourism are badly affected due to the pandemic outbreak. The need to reconsider the extension of NCLT period by another 6 months to avoid a rise in NPA’s.

2. What recovery measures are taken by government for rebuilding your sector so far? The government’s recently announced National Infrastructure Pipeline of around INR100 trillion. How could it be re-prioritised for pending and ongoing construction, infrastructure and related projects?

Infrastructure is one of the key elements for the growth of any economy. To spur activity, create demand for goods and services, and increase additional employment opportunities, the central government is increasingly focussed on investing in building robust infrastructure, which will be decisive in realising India’s Aatmanirbhar Bharat and ambition and boost its economic growth.

The government wants to trigger a spur in economic activity by infusing additional funds into robust infrastructure development. The great expenditure will have a cascading effect on economy , employment generation and consumption demand by creating transport oriented development and interlink infrastructure network across India will have to aliment the logistic cost. Such a seamless infrastructure network will propel manufacturing activities and help to build a stable supply chain network.

The government has identified around 7000 infrastructure projects across various parts of the country under the National Infrastructure Pipeline (NIP). These infrastructure projects will see financing by spend of around Rs 111 lakh crore till 2025. The fast-track of these projects will give a boost to the sagging economy and offset the effects of the pandemic. The central government is also in talks with the global fund house to assess their views on the recently taken policy reforms and also attract long-term investment to finance such potential projects. Hence it also necessitates the need of long-term financing.

The positive government’s intent was reflected in Union Budget FY 21–22 which announced the setting up of a National Bank for Financing Development to expedite the process of infrastructure financing in the country.

The both central and state governments has taken various measures to resurrect the sluggish real estate sector. The measures like extension of RERA deadline, stamp duty waiver , status quo of ready reckoner /circle rate, extension of CLSS scheme under PMAY-U , low home loan interest rate , availability of long term home loans acted as a growth levers. The sector witnessed optimistic consumer sentiments in H2 FY 21-22 riding high on sales velocity. The resurgence of the second covid-19 wave acted as a dent to the upward growth curve, which needs re-intervention of government and apex authorities. A fiscal stimulus will go a long way in waning anomalies wavering in the economic atmosphere and make the market environment more conducive for all the concerned stakeholders.

3. Due to this it can soak up relatively greater levels of employment? Despite an impressive economic recovery over the last quarter, share with us about challenges faced by the sectors, in the present times including yours?

State governments have been taking course correction steps to revive their economy by announcing various booster doses. The rampant vaccination drive is immunizing people and businesses to get back to normalcy. However, challenges like access to low financing credit and liquidity crunch still continue to plague the sector. The business continuity requires a long term solution from a macro aspect to help the sector transpire out of the gloomy situation. Though the unemployment rate had surged during the first wave, but now with mission unlocking and resumption of business activities will score up jobs creation.

The covid-19 pandemic has revolutionized the way business operates across the globe in the backdrop of flexi –remote work culture and digitization. This has stimulated the growth of the gig/informal economy among the labour sector. New labour law has to be framed to streamline the work economy and safeguard the interest of the workforce.

4. In 2019-20, the States spent a combined 2.9% of GDP on capex while the Centre spent 1.65%. How does this help or impact your business?

The Government of India has announced several proactive measures to deal with the dips in economic growth and simultaneously uphold the welfare of its citizens. Increase in government expenditure acts as a growth catalyst to strive for demand, consumption, GDP growth and employment generation that helps to negate the pandemic disaster. However, the government faces a perplexing situation to rightly strike a balance between monitoring growth and the financial deficit at the same time.

An increase in the capex by both the centre and state government would have a rippling multiplier effect across the industries and help the economy recover faster. Unlike earlier, governments have managed to strike a healthy balance between the capex and social spending. An increase in infrastructure spending would help in creating job opportunities and increase the purchasing power of the people.

5. The budgeted capital outlay for 2020-21 is Rs 5.7 lakh crore and 12 major States have to cut capex by Rs 2.7 lakh crore in FY 21. What kind of impact will it have on your business?

There has been an improvement in the revenue collection for the government since the pandemic. So capital spending would be one of the key priorities for the government to revive demand and boost the growth prospects as the economy grapples with recession. The government has also rationalised a lot of central schemes and centrally sponsored schemes in this regard.

In the union budget, 2021-22, the finance minister too increased the capital expenditure share which was the highest in the last one decade.

During times of crises, when the private sector investments remain subdued, the government does increase its capital outlay. The central government is also nudging states with specific mechanisms to increase its infrastructure spending to boost the demand for goods and services.

6. There are projects facing a funding challenge from banks. According to RBI, bad loans have rose to estimate to 20-year high by March 2021. Is this an alarming signal for new or pending projects when the banks shy away from funding new projects?

Due to the pandemic the banking sector too has been in shambles. There are reports that for the financial year 2021-22, there would be a rise in the non-performing assets to the tune of around 13-15 percent. The number would have been much higher had the central government not announced the loan moratorium relaxation. However, we believe that in the short term there would be an increase in the non-performing assets (NPA) of the bank. There is a further need to suspend the Insolvency and Bankruptcy Act (IBC) in the wave of the second wave to keep the rise in the NPA in check. However this is certainly not an alarming signal for any new or pending projects.

In the real estate sector too, the central government through its SWAMIH investment fund has announced a budget of Rs 25000 crore to fund the completion of all RERA registered affordable and middle income housing projects which were stuck due to the paucity of funds. The real estate sector today needs around 1.25 lakh crore to complete its stalled projects. We believe that additional liquidity measures would be required to fill the gap.

7. What are the future plans to manage and maintain healthy profitability to rebuild India towards stable and sustainable growth?

The keyword going forward for rebuilding India towards a stable and sustainable growth would be collaboration. It is important now for all the stakeholders like the government and industry to cohesively work together with commitment as equal stakeholders. The goal would be to join forces, using all its resources and pulling in the same direction with singleness of aim and oneness in the effort.

The objective of this integration would be to identify opportunities that will enhance existing value chains and identify future ecosystems to be developed as scalable and sustainable collaboration initiatives. We would need collaborative efforts to bring the economy back on track to generate the necessary employment and business opportunities with a minimal human cost.

8. Globally large EPC player’s manage projects in different corners of the world with production hubs strategically located in several continents. Nationally how have EPC contractors expanded their roles and adopted the roles of project consultants?

In the pandemic, digitization has emerged as a key word which has powered change in work dynamics. Engineering, procurement and construction industry too has evolved continuously since the last decade and a lot of change is happening due to the business and technology segment of this industry.

Today the EPC is now gearing up as a role of Project consultants offering a wide variety of services all at one stop destination. Also, they bring global best practices on board, with worldwide innovations, technologies, human capital, and insights in practice. Consulting role is more integrated with the company's goal and offers best solutions as a co-working cohort. Even in India, Business models have also been changing immensely over the years. In addition, there has been an emergence of new players and expansion of established and global players has led to a boundaryless business world.

9. What proactive role policymakers need to play to achieve their ambitious infrastructure plans and activities for big-budget turnkey projects? How will EPC contractors benefit from them?

The infrastructure sector today has become the biggest focus of the government to have sustainable development. However, to be successful, it needs to be vigilant about the implementation and concentrate on projects with quick turnaround time.

In this regard, the central government has also approved the setting up of an infrastructure financing bank that would be dedicated to the financing needs of all long-term infrastructure and development projects. This development fund institution (DFI) aims to raise around Rs 3 lakh crores over the next few years. It may be known that earlier too the government set up three long term infrastructure banks namely IFCI, ICICI and IDBI, but all three turned commercial in the long run.

Outlook of Real Estate 2021

This year, housing sales across major cities have been on a rise? Where is this demand coming in from as Work From Home is gaining ground and people are moving back to their hometowns?

The disruptive pandemic has predominantly reinforced the value of owned houses. The need for a secured asset that offers stability and safety in crisis is a goldmine investment against volatile assets. The remote working trend is further fuelling the urge to own a large spacious home in peripheral cities at attractive price points to integrate new normal living conditions.

In addition, market dynamics and policy regime are skewed towards nudging the fence sitters to convert into the first-time home buyers and existing ones to upgrade into luxury homes catalysed by fiscal growth levers.

Despite the Covid-19 pandemic, Indian real estate sector has witnessed two successful public issues of Real Estate Investment Trust (REIT). Are REITs, after the initial hesitation, gaining ground?

REITs are an alternative option for investment in real estate at a low unit price entry point. It reflects growing confidence in commercial real estate as an asset class. The Indian real estate investor has gradually warmed up to REITs, and the two successful public REIT issues are just the beginning of what will gradually grow in terms of investor confidence.

On Greenbase’s future plans (development of industrial parks) and from where would be the company raise funds for the same?

Greenbase, an Industrial and warehousing platform of Hiranandani Group has been working at delivering a holistic slew of offerings for end-users, and there are geographies where we are already working on creating Logistics and light industrial parks.

As the vaccination drive gains pace, we are bullish on the Indian economy, and on the sustained demand for Logistics and light industrial parks. Some locations (near Pune, Nasik and Oragadam, Chennai) are ‘work in progress’, while in some other locations, the parks are still on the drawing board.

Recently Maharashtra Urban Development ministry has amended the Unified Development Control and Promotion Regulations (Unified DCPR), allowing 5 percent amenity space for construction in plots. Your take on permitting 5 percent FSI for commercial and business districts in the country?

The recent amendment (yet notification is awaited) aims to infuse positivity for Commercial real estate development. If up to 5 FSI for is allowed for commercial business districts, then the move will be perceived to augment more commercial real estate spaces to be developed, which in turn will create more employment opportunities. This will also foster development of more commercial business districts (CBDs) across different regions in the state, which will ensure equal development across and not just the leading commercial cities like Mumbai, Pune etc. The move should augur well for the state’s economic growth. It will also allow economies of scale to positively impact viability of commercial projects.

A lot of residential projects across the country are marred by delays, and some of these are ultra-luxury housing projects. Developers are not meeting deadlines is the new normal, with projects overshooting deadline by years. Comments?

Indian real estate sector was rebooted with structural policy reforms and covid-19 pandemic was a nail in the coffin. The sector suffered from liquidity starving, muted demand, subdued investment, hindered sales velocity, disrupted supply chain & skyrocketing prices of essential raw materials, and acute migrant labour crisis. These challenges uprooted many developers in crisis and stalled up the designated timelines.

With mission unlocking, industry witnessed excellent sales velocity in lieu of fiscal stimulus but resurgence of second covid wave derailed the growth trajectory. Government and regulatory authorities have been considering timeline extension to cope up with the delays. Many of the branded developers with strong financial discipline and proven track record will be able to fast-track the work progress and assure timely delivery.

India has tens of thousands of small, mostly unbranded developers. What's your views on a possible consolidation in such a fragmented industry?

Real estate, as a business, has all sizes of stakeholders, big and small. The disruptive reforms have created a situation where developers who did not have ‘deep pockets’ were already looking out for joint ventures or consolidation with financially sound players. The Covid-19 pandemic, especially the second wave, has created a situation where mergers and acquisitions are gaining ground.

In the challenged economic scenario in a post-covid-19 world, one sees reasons for the fragmented industry to consolidate.

RERA has brought in some amount of transparency and accountability in real estate. What more needs to be done to weed out unscrupulous elements and increase customer confidence?

RERA is moving in the right direction and is taking the industry to the right aspects of accountability of the real estate developers and transparency in transactions. The regulatory aspect has brought in a safe and secure environment, one in which we see unscrupulous elements being weeded out. Obviously, this also leads to enhanced customer confidence.

Covid-19 has shuttered smaller players across various industries, while the stronger, larger entities have survived. Did the pandemic have a similar effect on real estate as well

Any economic crisis – and the Covid-19 pandemic fits the description perfectly – first impacts smaller players across industries, as surviving such challenging situations needs ‘deep pockets. For financially weak players, recent regulatory jolts led to a difficult ground for navigating and Covid-19 impacted many project’s profitability and also viability of the business.

The over leveraged players are opting to deleverage by consolidation, joint development, asset lights model, monetisation, mergers to re-anchor the sinking ship.

On Performance of Rental markets in Covid Times

Dr. Niranjan Hiranandani is National President, NAREDCO

Please share inputs on how the rental sector has performed during the second wave.

Real estate has faced tough times during the pandemic as also during the second wave; rental housing has also faced challenges. These include non-renewal by tenants who opted to move back to their hometowns because of ‘work from remote location’. The drop in renewals translated into reduced rentals.

Most importantly, owners/ landlords had to ensure the homes they rented out were Covid-19 appropriate, so there was the element of upgrading the interiors to meet requirements of tenants in the ‘new normal’.

In that sense, it has been a challenging time. In commercial real estate, rentals have been impacted as hybrid working systems as also work from remote locations has slowed down the growth which it exhibited during the past few years before the covid-19 pandemic struck.

Existing rental contracts have continued, renewals have seen some effect as a result of the second wave. Rental values have been affected in some micro-markets; while vacant rental spaces are expected to rise as a result of the second wave.

The challenges and how the real estate sector is overcoming them.

Consider that regulatory aspects where the industry expects support and help from authorities is yet to happen in the required quantum. Or, that finance remains the biggest hurdle for real estate as a sector.

Overcoming the challenges is all about keeping costs in control; finding ways to solve funding challenges as also hand-hold customers. Sentiment is what drives real estate, and in a stressed economic scenario, it always gets affected. The industry is working at solving the challenges, hoping for better days ahead.

The Model Tenancy Law will hopefully, get implemented soon and this should have the same positive impact on rental housing which RERA had on housing sales.

What individuals are need when looking for rental accommodation?

A safe and secure home under the ‘new normal’, especially in a world where humankind co-exists with the Covid-19 pandemic. Legal documentation which ensures proper protection for the tenant. Amenities, facilities and social infrastructure which ensure smooth living. A pro-active landlord who would take care of problems well in time is a major positive. Finally, rentals which should be within the renters’ budget.

Realty growth post economic unlock in June 2021

Realty after Unlock--developers expectations from the Government and the market?

Inputs of Dr. Niranjan Hiranandani, National President, NAREDCO and MD – Hiranandani Group.

The calibrated unlock post the resurgence of the lethal second wave, real estate sector faces dimmed sentiments from the buyer impacted by the regulatory aspects, challenges for developers varies from the shortage of skilled labour to shore up prices of essential raw materials. Liquidity supply seems to be sluggish with last mile funding for stressed projects even more so.

Government appealing citizens to step forward for vaccination jabs that can ensure normalcy in the short run, while India Inc nudges workforce with back to work strategy. Industry pines hope on regulatory deadline extension, debt restructuring, loan moratorium, suspension of IBC norms to avoid the avalanche of NPAs. It also anticipates some fiscal booster dose like stamp duty waiver to uplift the consumer sentiments ahead of festive season. With ‘break the chain’ being relaxed, and the economy opening up, the market is expected to turn ‘more responsive’ to real estate, with an uptick in sales and activate muted demand sentiments.

Resilience of Residential Real estate during second covid wave

Residential real estate remains resilient despite the covid second wave.

Shelter is a basic need, so houses will remain in demand. “One’s own house is the safest place to be during a pandemic” is a thought which hit home during the Covid-19 scenario – and has been reinforced during the second wave.

There is a realization that humankind will co-exist with Covid-19 a bit longer than was expected; the vaccination process is not going to get completed in a hurry. So, buying a home for ‘traditional renters’ as also ‘new millennials’ has been an on-going process since the first wave; it has picked up in the second wave.

Existing home owners upgrading to a bigger home with flexi interiors which can accommodate remote working and studies, wellness and entertainment – the numbers have grown in the second wave.

Construction work has been permitted with due regard for safety norms and Covid-19 measures; supply chains have not been disrupted – so, work has carried on across sites. Sales and marketing activities such as also selecting and booking a house have continued on the digital platform. These are some of the reasons why residential real estate remains resilient despite the second wave of Covid-19.

Dr. Niranjan Hiranandani is National President, NAREDCO

Rise in steel prices impacting housing price

Steel makers have again hiked the prices of steel.

The rates of HRC have been hiked by in the range of 3,000-4,000/ a tonne, while that of CRC by 79,000-80,000 per tonne.

Kindly let me know the impact of increased prices on steel consuming industries.

Auto, Consumer Goods and Construction are the major steel consuming sectors.

Steel makers have again hiked the prices of steel. The rates of HRC have been hiked by in the range of 3,000-4,000/ a tonne, while that of CRC by 79,000-80,000 per tonne. Kindly let me know the impact of increased prices on steel consuming industries. Auto, Consumer Goods and Construction are the major steel consuming sectors.

The economy is trying to recover from the lockdowns of the pandemic in 2020, it is faced with the challenge of the second wave, and now, hike in raw material prices.

The impact of hiked steel prices will be seen in terms of stress on the manufacturers/ real estate developers’ finances. From impacting profit margins, it will lead to challenges in terms of financial viability. Over the past 9 months, the hiked prices of steel have severely impacted under construction real estate projects as also infrastructure projects. For the consumer, the obvious impact will be seen in form of a possible hike in prices.

A recent report by Motilal Oswal Institutional Equities mentioned construction and real estate sector accounting for almost 55-60 per cent of total steel consumption followed by the auto sector, which accounts for 9 per cent. Capital goods (8 per cent) and consumer durables (6 per cent).

The impact of the recent hikes on the auto sector, according to media reports, is estimated to impact margins, and the cascading effect on selling prices is estimated to be in form of a 1 to 3 per cent hike in on-road prices. Obviously, actual hike by each auto manufacturer will depend upon many factors, and the actual percentage may vary.

Any input material cost hike impacts overall project costing, be it affordable or luxury housing – or commercial real estate. Steel constitutes about 15 per cent of any construction project, and the average impact on margins, as estimated by industry bodies, is expected to be in the range of 4 to 6 per cent.

Dr. Niranjan Hiranandani, National President, NAREDCO and Immediate Past President, Assocham

Unchanged Repo rate by RBI in Q2 2021

MEDIA COMMENT

Dr. Niranjan Hiranandani, National President, NAREDCO said, “With the second wave impacting the economy in terms of a slowdown as also the rise in inflation, as expected, the RBI has maintained a status quo on the policy rates, as also continued the ‘accommodative’ stance. The downward revision in FY22 GDP growth projection (9.5 per cent) was also on expected lines.”

“It is the sixth time consequently that RBI has kept the benchmark rates unchanged. While it reflects a response to the COVID-19 pandemic challenges, it is ‘advantage home loan borrower’, with the floating retail loan rates continuing to be at the lowest level over the past two decades,” he added.

“The low interest rate regime reflects ‘advantage borrowers’ and this is likely to continue for some more time. The RBI has pursued the broad intent of dealing with weak spots in the economy by providing on tap liquidity, with additional lending to distressed sectors,” he concluded.

Union Cabinet approves MTA

MEDIA QUOTE

Dr. Niranjan Hiranandani, National President, NAREDCO said, “The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes. It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage. The Act will enable institutionalization of rental housing by gradually shifting it towards the formal market.”

“Industry bodies like NAREDCO have been requesting authorities for a Model Tenancy Act which would create a vibrant, sustainable and inclusive rental housing market in the country. This Model Tenancy Act will ensure creation of new rental housing stock for all the income groups, addressing the challenge being faced by home seekers,” he said.

“There was a need for a new law, which would make things easier for all stakeholders – tenants, landlords and investors – to transact and deal in rental housing. The Union Cabinet, has approved the Model Tenancy Act for circulation to all States / Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably. This will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth,” he concluded.

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