Building Public & Private Synergy
Launched in 1995, Shriram Properties, a part of the Shriram Group founded in 1974, has an extensive presence across South India. Murali Malayappan, Manging Director,Shriram Properties speaks to Realty Plus about the real estate market potential and challenges as well as the company’s growth plans.
The company’s real-estate operation and presence
It was in the year 1997 that Shriram Properties launched its single project in Bangalore followed by projects in Chennai, Coimbatore, Vizag and Hyderabad. In 2005, the Indian markets were opened to FDI and utilising that opportunity, we further consolidated our realty business. Recently, the company has extended its real estate operations to Kolkata with a large township project. We have delivered over delivered about 12 million square feet and another 15 million square feet is under-delivery. In next 18 months the company expects to deliver close to 21 million square feet including both the residential and commercial properties across the cities. About 1.7 million square feet of commercial space has been delivered and 2.7million square feet is under construction.
The real estate market scenario and buyers trends
I would map Indian real estate to Bengaluru, Chennai and Hyderabad in South, Mumbai and Pune in West, Kolkata in East and the NCR region in North that cover 90 per cent of the realty market of the country. Cities of Ahmedabad and Kochi are the emerging players in the real estate market.
The South residential real-estate is more buyers’ driven than a speculative market. Bengaluru is 80% end user market and maybe 15-20% investor driven. Chennai and Hyderabad are even more buyer’s oriented residential realty markets. In India, next to gold, real estate is seen as the best investment avenue and therefore many look at buying a second home as safe investment rather than a speculative buying.
In terms of demand Bengaluru remains ahead of all cities. NCR region has 40 per cent of real estate market but is speculative and not dependable as it can crash any time while, South market is very safe and dependable.
In last four to five years, 10-12 million square feet of IT space absorption has happened in Bengaluru, Chennai is strong in manufacturing sector and Hyderabad is emerging as IT destination due to investor and business friendly government there which is why in the last two years, IT absorption has gone from zero to four-five million square feet in Hyderabad.
As a company we want to remain India specific, firstly looking at Ahmedabad and Kochi as next destinations for developing properties, leveraging the goodwill of our brand. Our thrust will also be on affordable housing in the markets we are already operating. The company functions in the mid-market segment and maybe in near future we will explore Mumbai market as well.
Governments’ role in real estate sector
The government needs to be friendlier to businesses and encourage developing enterprises in India. Accenture, Google, Microsoft, Apple and similar international firms are establishing their campuses in South India due to the workforce and skill available here.
However, Bangalore is not doing well in providing efficient infrastructure and may lose out in the long run to Hyderabad which is working at providing incentives to businesses and robust city infrastructure. Likewise, the Gujarat government proactive push has now made Ahmedabad a favourable investment destination.
In the South market, the potential is huge in terms of demand of office spaces. The challenges are infrastructure, governmental clearances, safety issues,such as for workers travelling at night and lack of coordination between government and private sector. There is only one option to address these challenges i.e.keen collaboration between government and the private sector.
CREDAI and NAREDCO are taking initiatives to reach out to the authorities and government too is showing positive signs of engaging with the developers. Given the introduction of real estate regulatory bill, the future seems better. It will bring in more credibility and transparency to the real estate market.
Housing boards in all the states collectively have not delivered in 30 years what the quantum and quality of housing private developers have delivered in past 15 years.
The real estate regulatory bill is consumer friendly but fails to focus on consumer needs. While there are penalties on developers for delay, the delay in approvals has still not been addressed. Ehat’s more, once the approvals are given there should be no retrograde actions. For instance, in Bengaluru the current demolishing drive is happening based on 1914 plans. Such a draconian law, where those who had been living in buildings approved by the government authorities and paying property taxes for years are now being rendered homeless is completely unacceptable.
Single window clearances are definitely a solution to the quick delivery of projects. One can discuss the shortening of approval time and number of approvals but again, post approvals, different department should not interpret laws accordingly and lead to the above mentioned scenario.
Social media is playing a key role in informing people and also helping buyers in making relevant decisions. Today, information is the most important part of customers. Developers are very serious about social media. For example, About 40 per cent of the sales of our own company come from electronic media.
However, it also has a negative aspect of being misused by scrupulous elements. More importantly the judicial courts should not base or take up cases against developers based on social media reports. The accusers should be held equally responsible for his actions as much as the developers.
The industry has matured a lot over the years. With the coming in of FDI, the funds are available to the developers. Companies like Tata Realty, Mahindra and Larsen & Toubro to name a few are bringing in the change. There is a lot of money available in the system through private equity (PE) investors but very few takers. Some of the PE investors have minimum ticket size 200 million dollars for a single investment, but they have been able to identify just five developers across the country. If the developers are professional, have their systems and processes in place, it is not difficult to raise the funding.
This is a reality that few developers have tainted the image of the community. Earlier the land aggregators or someone with extra money from other industry would become a developer. Today, the scenario is changing with professional companies entering the market. With coming of the real estate regulatory bill, the industry is set to become more corporate and professional and the perception about the developers will change.
The target of affordable housing
While, government target of housing for all by 2022is a noble cause but is un-achievable as that kind of urgency is not there. The current housing shortage is about 20 million homes, even if all the housing agencies start working towards it today, maybe the target can be achieved by 2030. Another important fact is that Government is talking about housing for economic weaker section of the society and not the affordable housing per se.
Affordable housing in Mumbai is in the range of Rs 70-80 lakh while, in Bengaluru it could be 15-20 lakhs. Again money and funding is available but the infrastructure such as connectivity, power, and sanitation remains a problem. Affordable housing is only feasible on lands on the periphery of the cities, if the basic infrastructure is not provided by the government, people will not move to the outskirts.
Government working with private sector is seen as anti- poor in the country. It is a myth. Taking the example of China that engaged with the private sector, today has oversupply of housing. Similarly, the telecom sector in India with the coming of private players there has seen over supply, making communication, data, Wi-Fi cheap across the country.