The Changing face of Realty
Piramal Realty has residential, commercial and mixed use developments spanning across Mumbai and Thane. Gaurav Sawhney, President Sales, Piramal Realty, briefs on the current market trends and the company’s own unique offerings.
In wake of the Union Budget 2017, outlook for the real-estate sector
Every year, the Union Budget is an event where the industry, investors and public await with bated breath, but this budget took on particular significance owing to demonetisation. Initially, the word on ground was that the real estate industry would be impacted by demonetisation, but we are certain that the Prime Minister’s demonetisation drive will benefit institutionalised players in the long run.
Finally, the jury will be out on two policy driven initiatives – Goods & Services Tax (GST) and Real Estate (Regulation & Development) Act (RERA), both of which will have sizable impact on the real estate industry for years to come. But right now, we are awaiting greater clarity with regards to the nitty-gritties of both these policies.
RERA, establishment is entirely regulatory, thus it is too soon to tell, as implementation is still in its infancy. For GST, the government is still adding the finishing touches to what is increasingly looking like a tax structure broken down into various tax brackets and dual in nature – a Central and State tax. However, one thing we would hope from the government – a practice that has been followed by other countries that have passed something similar – is ‘time’ to understand and implement the changes that will be ushered in by the GST reforms.
Finally, with REIT’s, we feel the major challenge won’t be in implementation, but in understanding the taxation side. We must also remember that initially, as per the idea we are getting from the industry is that REIT’s are primarily focused on retail when the real demand is in housing, so that will certainly be interesting to watch. Also, 25% of the investments will be made directly but the other 75% need to be from institutional investors and this could be difficult especially for players whose books are still developing. But while we are optimistic that REIT’s will benefit the industry, right now, we think that we will once again have to play the waiting game, as we await clarity.
The budget was definitely a shot in the arm for affordable housing. The government has created the right environment which should lead to long-term demand. After all, with easy access to institutional funding and long-term financing at lower rates, this will reduce costs of construction for developers like us, and allow the benefits to be passed on to the consumer. That being said, we envision that the demand for niche segments like premium luxury and contemporary luxury is likely to continue increasing.
The new investment trends of buyers in primary & secondary property markets
When it comes to buyers in the primary market, developers have had to come to terms with more conscious and informed buyers. They have now moved from price elasticity to brand elasticity, and it is no longer enough to just build something; instead quality assurance, timely execution of projects and transparency are paramount in convincing the customer. This shift in mindset is setting the tone for the primary market. Credibility is now the leading criteria for customers.
Thanks to demonetization, one of the investment trends that we are seeing in both primary and secondary markets, is that transactions are more cheque-led and that is something we are going to see moving forward. One more thing we will see in the secondary market is that due to market dynamics good quality land can be bought from financially stressed developers, and this can lead to building projects in areas where a few years ago there was a zero possibility. This will also act as a correction and help in cleaning up the system, while casting a wider net that targets value-seeking consumers.
Finally, the process is still ongoing but one of the trends we are going to see is investors across the divide looking into REIT’s, as this will be a great investment vehicle for companies to utilize a platform that will allow an investor to invest in publicly listed stocks.
The fund raising opportunities and challenges for the developers
There are signs of challenges when it comes to fundraising as many real estate financing companies are finding the going tough. Investors – especially from abroad – will look towards more direct partnerships with developers as first time fund managers need to establish credibility owing to the tough environment. So be it off-shore or domestic, fundraisers are definitely going to have be patient. When we speak about Piramal Realty, Goldman Sachs and Warburg Pincus have invested USD$434 million in the company, at an entity level. So, if the portfolio is well-managed, and there is a timely delivery of projects, the strategy for funding will be sound.
Piramal Realty portfolio in residential & office space
The Piramal Realty portfolio – as of now – comprises Piramal Aranya, Piramal Vaikunth, Piramal Revanta, and Agastya Corporate Park.
Piramal Aranya is our headline project in the Byculla area in Mumbai. This is a residential project, 70 floors and spread over seven acres. Piramal Vaikunth which is located in Thane, is spread over 32 acres, and comprises indigenous flora and fauna. Piramal Revanta is a residential development in the fast growing central suburbs of Mumbai, and will provide aesthetic designs and enhanced living to its residents. The office space in Kurla – Agastya Corporate Park, is a plus property encompassing of a little over 16 acres. It offers premium office spaces that are part of a corporate park located on the arterial LBS Road, Kurla.
Currently, our projects are based in Mumbai and Thane. We have invested in marquee properties in Byculla, Mulund, Thane, and Kurla. Currently, most of our properties are in the mid-income and luxury segment. The organization’s strategy is predominantly Mumbai-focused, with an added scope of outreach to Non Resident Indians (NRIs) in cities like Dubai, Singapore, and London, who are looking for renowned and reliable developers that can safeguard their investments.