In Pursuit of Excellence: Surendra Hiranandani contends real estate business today has become capital intensive and even more challenging

In Pursuit of Excellence: Surendra Hiranandani contends real estate business today has become capital intensive and even more challenging
08/03/2019 , by , in EXPERT ZONE, Latest News, Trends

Surendra Hiranandani, Founder and Managing Director, House of Hiranandani in conversation with Sapna Srivastava contends that today real estate business has become capital intensive and even more challenging for the young entrepreneurs.

Surendra Hiranandani feels that in earlier times, the real estate sector was much more feasible for business with approvals easy to come and sales avenues at pre-launch and launch stages enabling funds availability to compete the project without getting under the burden of debts. “In 1980’s you could get land on deferred payment, put up a board, start selling, use that money to get approvals and then start constructing. Till 1991, bank finance for real estate did not exist. From 2000 onwards as the industry became larger, there were many instances of projects not getting completed due to diversion of funds by builders and customers being left high and dry. Now with RERA, the sector is getting regulated but also approval processes have become lengthier and unpredictable taking a toll on the debt cycle of the project. Especially, the interpretation of laws and regulations have got taken over by the judiciary and activists. Now only well-capitalised players are able to enter the segment. So for established players like us RERA is wonderful. We have the organization, the resources to be able to comply. But for a young entrepreneur to think of this as a business to enter, it is not a viable proposition. It has become more a finance business than a construction business,” he said.

Real estate is now a Finance Business Surendra expressed that today controlling costs has become a major issue which is why projects are now led by the finance team. He said, “Developing a land is building a community, not just a building or a project. One needs to have a passion for doing it. It is quality and innovation that drives cost efficiency.” Talking about other challenges he added, “For land you still have to deal with revenue department to get land titles, but there are no definitive land titles in India. So even if the best solicitor gives you the title certificate, the court can grant a stay order. The retrospective laws are also detrimental to sector’s growth. In addition, similar bye-laws cannot be applied to all regions, which are widely different in citizen’s needs, culture, living patterns, behaviours and consumptions. One law for all won’t do. But unfortunately that’s the way it is. The regulations have become rigid, there’s no definitive title for land, no definitive approvals. Anything can be questioned later and relooked at and reopened. This makes risk factors high. Also multiple departments interfere right from environment to pollution control, civil aviation department, defence establishments, land revenue departments to approval authorities etc. The judicial and governmental interference have increased.

Between 2010 and 2014 the company succeeded in bringing its debt to zero. It is making the capital work more efficiently rather than going berserk with expansion and just making top line figures. Because then one will only be working for the banks

In Pursuit of Excellence Surendra Hiranandani considered a pioneer in adapting the best of technology and design initiated rebuilding the engineering organization of the company in 1985, “We set up our own horticulture department to use indigenous shrubs and trees for our large scale developments. Anthony Remedios, an innovator in civil engineering was brought on-board to set up training programmes and create our own benchmarking with international standards. In the 90s we were the first to bring in copper plumbing to India and gypsum plasters for walls and ceilings. All our designs are based on making durable structures and lasting exterior finishes to stay strong and easy to maintain during building’s lifecycle of more than 100 years. In fact the Government of India amended the building codes in 2000, but we had implemented them in our projects way back in 1985. Since then we have done our own research and created a comprehensive construction manual starting with concrete to all aspects of construction, plumbing, electrical, waterproofing etc. Technology for construction depends on how you execute it. A lot of imported technologies and ideas have to be adapted to Indian conditions and Indian labour workings.”

The future of our cities will depend on how we can escape the use of private automobiles. Making our cities pedestrian friendly with efficient public transport is very critical for India’s economic growth.

House of Hiranandani – A Debt free Company Between 2010 and 2014 the company succeeded in bringing its debt to zero. It is making the capital work more efficiently rather than going berserk with expansion and just making top line figures. Because then one will only be working for the banks, said Surendra. “We are basically a design and engineering firm, not a finance oriented organization. We look at product development in terms of engineering, design, the surroundings, quality and selection of materials to deliver a holistic product.” Surendra Hiranandani defines Indian real estate as 6 urban centres – Delhi- NCR, Mumbai, Pune, Bengaluru, Hyderabad and Chennai constituting 70% of the urban development of the country. “The boom in India’s exports, IT services, BFSI and ITeS sector has contributed to growing demand of real estate across India. Warehousing and Data centres are flourishing, but in the manufacturing segment we are still struggling. The bulk realty development is still residential and commercial. Of course residential will grow if there is growth in the economy.” According to him, House of Hiranandani functions in affordable luxury segment, “We do not build high end down town projects that demand top prices, but are present in the outskirts where land costs are lower. Our products build up the value of the property and the place and we are able to deliver a product that is comparable to luxury projects but is reasonably priced. The price range starts from Rs 6000- 7000/per sqft and depends on the stage of construction. However, it’s not only about price as getting velocity of sales is important nowadays. We are grateful to our consumers who have placed their faith in us while making the biggest purchase of their life.”

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