The intent and vision is to tap into the emerging India story
Sunil Mishra, Chief Operating Officer (Housing Business) IL&FS Township & Urban Assets Limited in conversation with SapnaSrivastava
IL&FS Townships & Urban Assets Limited (ITUAL) is a newly created business vertical of IL&FS Group. Some of the projects undertaken are development Rights of 7.77 million sqft in Gujarat Finance International Tec City (GIFT), Housing in Uttarakhand on BOT for CRPF and Housing Development across Andhra Pradesh, Tamil Nadu, Rajasthan and Maharashtra.
What is your business model of development?
Our first residential complex in gift city is NavamElegance is a 23 storey twin tower offering 168 units of 2 BHK apartments and 8 Duplexes. It will be the first high rise residential in Gift city. We are also evaluating existing land banks in Hyderabad, Chennai to develop projects. Besides that, we are also evaluating entry projects in Mumbai, Bangalore, Pune under some JDA agreements. So, over the next 6 years we will be in the top 5-6 cities of India. If we want to accelerate our growth and get into more cities quickly we can go for joint development agreement. If we don’t go purely the JDA route and acquire land, then we may look at banks, NBFCs to a private equity infusion for funding.
We will evaluate all opportunities in affordable and mid-market depending from city and location to demand pattern and returns in that particular area. For instance, we are going to limit ourselves to a 75-lakh price range in North Mumbai, Gurgaon city and about 1cr to 1.5cr in Mumbai city which is affordable in mid-market.
We are big infrastructure developers so we prefer to own the land and develop it either through outright land purchase or development management model in JDA. We have been a B2B player for the last 30 years and can tap into our internal resources and business contacts to either help develop the projects or be the potential customers for the housing projects. Build to suit is another model where we develop housing for a company or PSUs.
“IL&FS is a known brand in the B2B space. Not many people on the street would know IL&FS as they might know other developers. That’s my challenge – to build a B2C brand that homebuyers can trust.”
Do you feel that regional players have that advantage over national level developers?
This is not an oligopolistic industry. Suppose there are thousand developers now, the numbers will come down to 15- 20 big names in five to ten years. That is also is a big number. But real estate is geographically spread out and it is a regional game. There is space for everyone because the need and the demand are so huge.
What Tom Peters said about think global and act local truly applies to real estate. The consumer cares for the brand from the production perspective. I agree, it’s a tough competition with local strong developers but the success also depends on how quickly we learn the local ecosystem. Even within a same city the consumer behavior changes from one location to another. There are some defining factors at city level and some at local level. So I have to understand that and learn that which is based on the market intelligence. Coke and Pepsi have learnt that and Ikea will have to learn that.
So, you see a bright future for real estate?
I am always cautiously optimistic. In the next 6-12 months you will see the numbers of end users rising and then the investors will follow soon after. Don’t expect 20% returns in any of the asset classes. A 12%-15%, return would be great return to have in India. This sector is going to see a measured growth in the next 5-10 years, maybe in pockets to start of with. Real-estate has suffered enough for the last few years and now we are ready to bounce back.