The past year was a tumultuous year for real estate in India

Realty Zone / Mar 1 2013

“The past year was a tumultuous year for real estate in India. In a country where real estate is usually considered to be a safe investment, sales were slow. Prices, however, remained stable keeping the proﬁt margin in check. An appeasement of FSI restrictions in place with the new parking schemes will be positive for the market. They will help address the ever-growing issue of public parking within residential complexes, and will allow developers to beneﬁt from the additional FSI consumable.”

Rohan Siroya, Partner, Legend Siroya Realtors shares his views with Sandeep Sharma about his organisation, core competencies, Ambernath Township project, challenges faced by developers for building affordable homes, real estate scenario, re-development projects, increasing construction cost, shortage of skilled labour and recommendations to solve India’s growing housing deﬁct. Edited Excerpts…

Could you tell us about your organisation and core competencies in the real estate sector?
Our company has been in existence since over 40 years. It has come a long way in building the trust that is called “Legend Siroya” today. There was a time when we used to only undertake one project at a time and today we have more than 20 projects that are under construction and about 30 more in the pipeline. With projects comprising of residential, commercial, hospitality and mixed-use real estate projects, Legend Siroya Developers boasts of a diversiﬁed portfolio with a pan-India presence. From SRA constructions, affordable housing to luxury housing, we have projects spanning through different segments in the real estate sector.

Could you share with us details about your recently completed township project in Ambernath?
We have ﬁnished a township project of 51 buildings in Ambernath which falls under the affordable housing segment. Recently, we accomplished other such projects in the Vasai region near Mumbai. Soon we plan to launch some more new projects in the Virar region. These will be small budget homes with prices range of `3, 500 to `5,000 per sq ft.

What kind of challenges do you face to keep your prices affordable for the masses?
The numerous challenges faced by the developers are: A) Borrowing cost: money market rates from individual investors are very high. B) Inﬂation: raises the prices of our inputs, costs translates into price increase for customer. C) Land scarcity and land prices: extremely high land prices due to scarcity results in escalated pricing. D) Infrastructural growth: if infrastructural growth is exponential, then far off areas that were considered not easily accessible will come within reach of the market. E) Government regulations: the government processes are full of loopholes and time consuming documentation. If these processes become streamlined and reduce the time taken for permissions, projects will be delivered faster, reducing interest burdens, resources wasted, and an oversupply in the market. This will keep a check on prices.

How is the real estate scenario shaping up in Mumbai and Pune? Are you optimistic about the revival of overall demand in CY2013?
The past year was a tumultuous year for real estate in India. In a country where real estate is usually considered to be a safe investment, sales were slow. Prices, however, remained stable keeping the proﬁt margin in check. There are always customers for Indian realty in our ever-growing population. With any new policy, the initial bumps are expected.

An appeasement of FSI restrictions in place with the new parking schemes will be positive for the market. They will help address the ever-growing issue of public parking within residential complexes, and will allow developers to beneﬁt from the additional FSI consumable. The excess supply generated through this should keep a close check on prices, so buying a property for a customer will be an easy decision with little ﬂuctuations in prices in markets. However, on a positive note, I believe that ﬁnally the road in relation to those will be smoother ahead in 2013 as the policy is being understood and adopted.

You have a diversiﬁed project portfolio comprising residential, commercial, hospitality and mixed-use real estate segment. Which of these segments are you focusing to drive revenues in CY2013?
Residential has always been our core competency, and we will continue to build on this in the future. That being said, we have ventured into the mixed use (Marbella at Lonavala) and hospitality sector with our hotel in Hyderabad. We consistently look at having a market balance and do not place any real estate project out of our sight.

Do you have any projects in the re-development sphere? Please share details of these projects.
Siroya has about 45 redevelopment projects under various SRA, BMC and MHADA schemes. Currently, there are about 22 projects that are under construction and another 20 at various stages of approvals. We have recently completed our slum rehabilitation project Kingston Tower in Parel. The project started in 2005 and was completed in 2009. It is the ﬁrst tower of its height in Parel with 34 ﬂoors plus 4 ﬂoors for parking. Also, our SRA project at Mahul Road, Chembur is around 3-4 months away from completion

Are you targeting any other geography apart from Mumbai, Pune, Bangalore and Hyderabad?
Various tier 2 cities are really coming up, and these are exciting times for real estate ventures there. This will bring up the standards of local regulations and create an infrastructure for the nation as a whole. We have kept numerous other proposals in various cities in India, and are currently in the process of adding them to the pipeline.

Is it true that builders are holding stock in Tier-I cities and not reducing prices for the end customer?
We choose not to comment on what other builders do or don’t do, and can only comment on our actions. Our products are built for the consumer, and we are always open to sales. Prices are maintained by prevailing market rates, and if we receive offers around those rates, we will deﬁnitely sell. At the same time, no developer will take a hit on margins, especially with a slow liquid market that we are going through right now.

How do you ensure timely completion of your projects?
Like any business, deliverance can only be guaranteed through a structure. We believe very ﬁrmly, in keeping with our deadlines and plans as this leads to the most critical element of business; investor and customer trust. Through various techniques and construction planning we ensure we maintain this.

How far the construction cost has increased in your projects over the last three years in percentage terms? Out of cement, steel, equipment and human resources, which of the component was largely responsible for the increase in construction cost?
Construction costs have risen every year by an average of 5-10 percent, annually. Cement and steel have shot up in their expense and this translates in the ending price. While we are going through a slowdown period in the economy, hiring resources are not altogether expensive, however senior talent is always difﬁcult to ﬁnd, and there is a price to pay for the same.

Industry players have reported shortage of skilled and unskilled labour for construction projects. What are the cause and your recommendation to solve this issue?
There is a shortage of skilled manpower and in an industry that is growing with such rapid pace. It is hard to retain talent sometimes. The categorization of real estate and construction as one of the premier revenue creating sectors with lower regulations and more free market dynamics will go a long way in resolving this. Transparency amongst ﬁrms and more educational focus to churn out skilled labour will help.

Going forward, what are your immediate and long terms plans for expansion in the realty sphere?
We have around 40 projects in the pipeline as of now. Around 6-7 projects with a total of 1 million sq ft are expected to go on the ﬂoors in 2012-13. We hope to launch around 5-6 more projects covering 600,000 sq ft in 2013-14. We plan on a multiple other super luxury and economic housing projects in different parts of Mumbai. In this way, we wish to express that brand Legend Siroya is a consumer brand and caters to all classes of consumers.

What’s your recommendation for solving the growing housing shortage in urban areas?
Fast Track Project Permissions: There is a housing shortage of about 27 million homes across India and with every day that passes by it is increasing as backlog piles up. Most projects get delayed because of delay in receiving permissions and certain projects that do get approved get delayed in receiving occupation. Each project requires more than 100 permissions and NOC’s from various departments, and this process needs to be streamlined for the smooth execution of projects.