will bring more transparency and diligence in the real estate sector. Most of the provisions have taken into consideration the buyers’ perspective. The real estate companies will have to approach their respective associations in order to have provisions amended, which will enable them to be heard. From the buyers’ point of view, it is largely in their favour as there will be a State Real Estate Regulatory Authority, which means that builders now have to register all their projects measuring more than 500 square meters.
Ankush Mehta, Director, Neo Infracon Ltd
shares his views with Sandeep Sharma
about his company's footprint in the real estate sector, business generated in FY2015, projects completed/announced, market scenario shaping up in MMR, project finance, sustainable construction, green building development, need for single window clearance, RERA, shortage of manpower in the construction sector, and the measures required at the Government level to boost real estate sector in India. Edited Excerpts…
Could you brief us about your company's footprint in the real estate sector?
Naresh Mehta and Dilip Mehta, t
wo industrious individuals, started NEO INFRACON LTD
in 2002. They faced a number of obstacles and difficulties, but they had the courage and conviction to overcome the challenges and odds thrown at them. After a few initial hiccups, they successfully established themselves in the industry among competitive real estate developers and builders.
Projects completed till date includes:
• Neo Galaxy
• Neo Logistic Park
• Neo Ornate
• Deshmukh Lane
• Neo Pearl
• Neo Residency
How did your company fare so far in FY2015-16 in terms of business generated, growth rate and your projects completed/announced?
In FY2015-16, although the overall real estate market condition was not encouraging, we were able to achieve approximately a 10% growth due to hard work put in by our dedicated team.
During the last financial year we have completed Neo Galaxy and Neo Pearl Project. The residential projects were announced at Sikka Nagar and a new site at Khopoli in our completed project “Neo Residency”
Could you provide us insight about the emerging trends in the Indian real estate sector? According to you, which segment of the real estate will be the top runner in the next five years? And Why?
The Indian Real Estate market today stands at a size of USD 93.8 billion and is anticipated to reach USD 180 Billion by 2020. This is based on the following factors and influences:
• Demand for residential properties has surged due to increased urbanisation and rising household income
• About 10 million people migrate to major cities every year
• 35 percent of the population is in the young age bracket (15-35 years)
• Growing economy is driving demand in the commercial and retail space.
• Sectors such as education and health-care
• Hospitality sector
• FDI of USD 24.156 billion between April 2000 and September 2015
• During April 2000-September 2015 the real estate sector accounted for 9 percent of total FDI inflow into India.
• FDI upto 100 percent for townships and settlement development projects have been sanctioned by the government.
• Under Housing for All Scheme, by 2022, 6 crore houses are to be built; 4 crore will be in rural areas and 2 crore in urban areas.
Real Estate Sector has mainly 5 segments like
• Residential Space
• Commercial Space
• Retail Space
• Hospitality Space
The residential space will be in demand for cities like Indore, Raipur, Ahmedabad, Jaipur and other tier-two cities. Government plan to build 100 smart cities will reduce the migration of people to metros and other developed cities. In metros, commercial space will drive the demand, as rapid growth in the IT, BFSI and Telecom sector has been witnessed and this in turn is raising the demand from MNC’s. The retail space is expected to see a strong growth in NCR, Mumbai and cities like Bengaluru and Hyderabad. The hospitality space is likely to see strong growth in NCR and Mumbai followed by Bengaluru, Hyderabad and Chennai.
How is the market scenario shaping up in Mumbai Metropolitan region? What kind of challenges are you facing in improving your project sales?
It is challenging as inventory is on the rise and builders and developers are holding at a high price, which is deterring house seekers from buying homes. Moreover, the residential sector in MMR has lost its importance as one of sectors for investment.
Apart from above, following are challenges faced
• Competitive Rivalry
• Threat of New Entrants
• Substitute products
• Bargaining power of suppliers
• Bargaining power of customers
Brief us about your ongoing and upcoming projects in the residential and commercial segment?
Our ongoing projects are
• Neo Amity
• Neo Clarissa
• Residential Project at Joshi Wadi
Our upcoming projects include:
• Neo Emporia
• Neo Paradise
• Neo City
• Residential Project at Kishor Bhavan
Are you also looking at opportunities in redevelopment space in MMR?
Yes, we focus on redevelopment of residential projects in MMR and hence always looking out for good opportunities.
What's your take on the need to streamline Construction/Project Finance in India? How do you meet your funding requirements?
Streamlining constructions and project finance in India is essential. Till date, banks and financial institutions have restricted themselves to fund only up to 60% of the total construction cost, which means that the balance 40% has to be borne by the developer or local finance agents who shell out money at an exorbitant rate of interest. This ultimately leads to increase in cost of project and hence an increase in sale price.
We rely on financial institutions/banks for financing upto 60% and the balance 40% we finance from our own resources.
What’s your take on sustainable construction and green building development? What's your contribution towards green building development?
Sustainable construction and green building development, in short, is the use of processes, which are environmentally responsible and resource efficient throughout a building life cycle. We are in the process of implementing green building development norms. To start with we are in the process of
• Efficiently using energy, water and other resources
• Reducing waste, pollution and environmental degradation
• Protecting occupant’s health and improving employee productivity
As a way forward, we have started / plans to implement the following:
1. We have started using flyash, since it has good pozzolanic properties. Upto 35% of the cement content in concrete can be substituted with flyash, without sacrificing strength and achieving durability and economy in the construction
2. We are in the process of using energy from solar power by putting up solar panels in our upcoming projects
3. We are in the process of using ground water for construction and subsequently implementing rainwater harvesting systems
4. We are in the process of implementing Geo Thermal Heat Formation which is converted into energy and harnessed to cool buildings throughout the day.
5. Recycling all waste and building from recycled materials
Could you comment on the need and importance of Single Window clearance system for real estate projects?
It is actually a need of the hour. Many construction projects are getting stuck due to the list of different sanctions that have to be obtained from a number of government departments. Single Window Clearance System will help in completion of construction projects on time, improve efficiency within the system and thereby help the sector regain its past glory.
What can be the impact of Real Estate Regulatory Act, 2016 (RERA) on the real estate companies and the buyers at large?
RERA2016 will bring more transparency and diligence in the real estate sector. Most of the provisions have taken into consideration the buyers’ perspective. The real estate companies will have to approach their respective associations in order to have provisions amended, which will enable them to be heard. From the buyers’ point of view, it is largely in their favour as there will be a State Real Estate Regulatory Authority, which means that builders now have to register all their projects measuring more than 500 square meters.
What kind of solution do you recommend to overcome shortage of manpower in the construction sector?
Mechanized systems of construction and automation are required in the real estate sector. In India, builders are still relying on manpower for construction and are apprehensive to use machines, as it is expensive. So, in order to overcome the shortage of manpower, the government must help builders by reducing duties on imported construction machines as there are very few local companies making construction machinery today. This will help Real Estate companies complete their projects on time and honour their commitment, even when there is a shortage of manpower.
As the country gears up to develop 100 Smart Cities and is focusing on setting up manufacturing hubs as part of 'Make in India' campaign. What kind of opportunities do you see for your company?
We see a great potential for our company over the years as we have presence Pan India through our land banks and our expertise in the field of construction.
What kinds of measures are required to be initiated by the government to boost real estate sector in India?
The government must implement the following to boost the real estate sector growth:
• A single window clearance system
• Make service land available in urban areas for construction through amendments in respective land acts
• Increase Income Tax exemption limits for home buyers
• Increase the pace of completing infrastructure projects