Credai conclave 2013 – day 1: december 13, 2013 housing: the game changer leading to double-digit gdp growth



· Sushil Mantri, Managing Director of Mantri Developers

· C Shekar Reddy, President, CREDAI and Managing Director, CSR Estates Ltd

· Geetamber Anand, President Elect, CREDAI, Chairman and Managing Director of ATS Infrastructure Ltd

Panelists at the first session of the CREDAI conclave held today agreed that there is not much scope for reduction of prices of homes unless the Government took steps to relax Floor Space Index norms, reduce tax burden on the real estate industry, implement single window clearance for real estate projects and reduce interest rates.

Developers opined that profit of real estate developers has gone down substantially and there is no scope for further price reduction. Sushil Mantri, Managing Director of Mantri Developers, said, "Housing industry is in deep shortage. It is wrong to say that prices should come down. How can prices come down when there is a shortage of housing?"

C Shekar Reddy, President, CREDAI and Managing Director, CSR Estates Ltd, urged the Government to do away with the Floor Space Index (FSI) concept, take the approval process online and reduce tax burden on the industry. "The real estate industry has a tax burden of 30-40%. This has to come down to less than 15%. There are multiple taxes on the industry, which eventually gets passed on to buyers," Reddy said.

Reddy said these measures will create huge supply of homes and in a competitive market the supply will bring down home prices. Geetamber Anand, President Elect, CREDAI, Chairman and Managing Director of ATS Infrastructure Ltd, hoped the Government would soon implement single window clearance system. "Every time we ask the Government to implement single window clearance, they say we understand but it hasn't happened. "

Second session - Challenges opportunities 2014

Speakers
· R K Arora, Chairman and Managing Director, Supertech Ltd
· Vijay Mirchandani, national secretary, Confederation of Real Estate Developers' Associations of India
· Jaxay Shah, MD, Savvy Infrastructure Pvt Ltd, Vice President, CREDAI
· Kumar Gera, Chairman, Gera Developments Pvt Ltd
· Rajni kanth S Ajmera, Chairman, Ajmera Group
Will 2014 be better than 2013 was for real estate industry?

The year 2013 was marked by a slowdown in the real estate industry. Will 2014 be better? Panelists at the third session of CREDAI conclave believe the industry is going through a temporary blip and will bounce back next year. RK Arora, Chairman and Managing Director, Supertech Ltd said, the slowdown in 2013 was led by sentiment and not so much by a slowdown in sales or a fall in demand for homes. Arora said since it is more of a sentiment led slowdown, home prices will not fall. "In fact, I think prices will go up, so it is a good time to put money in real estate," he said.

Arora said there is a lot of scope for growth in the affordable housing segment. " We have observed that 90% of the demand for housing is in the affordable housing segment. I think even in 2014, there will be good demand for this segment of housing," he said.

Vijay Mirchandani, National Secretary, Confederation of Real Estate Developers' Associations of India (CREDAI) said, the aspiration for a home remains constant. "The dream for a home will never be over," he said. "The weak sentiment towards housing is because of uncertainty in political environment. I think we will quickly recover." While Mirchandani agreed with Arora that the maximum demand for homes is in the affordable segment, he said the definition of affordable housing changes from city to city. "What is affordable housing in one city is luxury housing in another city but demand is always there for affordable homes," he said. Mirchandani said with the increase in cost of land and construction material, the only way a developer can make homes affordable is by reducing the size of apartment.

Jaxay Shah, MD, Savvy Infrastructure Pvt Ltd, Vice President, CREDAI, gave a parallel to Dubai and US. "In Dubai and US, there were worse problems but they survived, so we are hopeful of 2014," he said.

Kumar Gera, Chairman, Gera Developments Pvt Ltd, said he expects real estate industry to recover in 2014, because of a change in Government at the centre. "In 2014 there will be change because we have Lok Sabha elections. The UPA Government is not giving priority to housing. Their focus is only on slum housing," he said.

Gera reiterated that 2014 will bring a positive change in every industry, which will improve the sentiments in the real estate industry. Gera also called for allowing foreign investment for individual housing. "A change must come. Foreigners should be allowed to invest in real estate sector like it is allowed in countries such as Spain," he said.

Rajni kanth S Ajmera, Chairman, Ajmera Group, rued that the Government treated the real estate sector like an "untouchable" industry. He urged the Government to give priority sector lending to the industry. "Banks finance only about 40% of construction financing, which constitutes roughly 70% of the cost of our project. Banks should finance 100% of the cost of construction," Ajmera said.

Third session - Shaping the future - A challenge

Speakers
· Mohit Goel, CEO, Omaxe Ltd, and son of Rohtas Goel, Chairman and Managing Director, Omaxe Ltd
· Viswajith Kumar,Director, Navin Housing and Properties Pvt Ltd and son of Dr R Kumar, Managing Director, Navin Hosuing
· Mohit Arora, Director, Supertech Ltd, and son of RK Arora, Chairman and Managing Director of Supertech
· Kruti Kumar Jain, Director, Kumar Urban Development
The young turks of the real estate industry place winning customer trust and loyalty as one of their top priorities. Mohit Goel, CEO, Omaxe Ltd, and son of Rohtas Goel, Chairman and Managing Director, Omaxe Ltd, says that he has brought in aggression into the company. "I am impatient in a good way and I believe in creating an emotional connect with our buyers. Anyone who does business with us should feel satisfied," he said.

Viswajith Kumar,Director, Navin Housing and Properties Pvt Ltd and son of Dr R Kumar, Managing Director, Navin Housing, says one of the biggest challenge the current generation of developers face is keeping in tune with changing customer preferences. "Staying with the market is critical. Lifestyle changes are happening. We need to see how we can catch the pulse of young home buyer. It is part of the evolutionary process. If I don't catch it, I won't survive," said Kumar adding that he is trying to create a revolution in housing. "Things are being done in same way. I want to change the status quo," he said.

Mohit Arora, Director, Supertech Ltd, and son of RK Arora, Chairman and Managing Director of Supertech, is worried that the real estate sector does not have enough transparency. "We need to be as responsible as a bank and we need to bring in more transparency for buyer. We need to build more trust in the industry," he said.

Kruti Kumar Jain, Director, Kumar Urban Development joined the company after school. "Any city is identified with modern skyscrapers built there. Real estate is part of the identity of a nation. So I knew I had to be part of the industry," she said. Jain says every project has different challenges. "This isn't an opportunity any other industry will give us," she said.

Fourth session - Key Note Session

Speakers
· Dr Giriji Vyas, Union Minister of Housing and Urban Poverty Alleviation
· C Shekhar Reddy, President, CREDAI and Managing Director, CSR Estates Ltd
· Senior BJP leader, Venkaiah Naidu
Union Minister of Housing and Urban Poverty Alleviation, Dr Giriji Vyas, today assured real estate developers that the real estate regulatory bill will be suitably modified if necessary. Speaking at a real estate conclave organized by CREDAI in New Delhi, Dr Vyas said the industry should not have any fears about the real estate regulatory bill. "There is no reason for worrying about this. We will talk to you first on the real estate regulatory bill," she said.

The Minister in response to criticism from the industry said there should be more dialogue between the Ministry and the real estate industry. "Real estate has the potential to create the right economic environment. We are keen to bring in reforms for the real estate sector. The sector has to grow," she said.

In what could be a relief for the real estate sector, Dr Vyas agreed that the Government will do a rethink on multiple taxation of the real estate sector. "We will think about relaxing Floor Space Index (FSI) norms as well and on relaxing loan facility to the sector," she said.

C Shekhar Reddy, President, CREDAI and Managing Director, CSR Estates Ltd, raised issues related to the real estate sector such as FSI norms, multiple taxation, strict lending to the real estate sector and issues related to the real estate regulatory bll.

"The real estate regulatory bill, if it is implemented in its current form will push up prices by 30%, instead of reducing it," said Reddy. "We need a comprehensive regulatory authority that covers all the stakeholders of the real estate industry," he said. The Minister concluded her statement with the assurance that all the issues discussed at the conclave will be taken up by the Government.

Senior BJP leader, Venkaiah Naidu, today asked for real estate sector to be declared as an industry. Speaking at a real estate conclave organized by CREDAI in New Delhi today, Naidu said the Government has not focused enough on creation of homes. "The NDA Government had brought in housing sector reforms but a lot more needs to be done. As a first step, the sector needs to be declared as an industry," Naidu said.

Naidu also called for simultaneous reforms in the banking sector, land reforms and rationalization of interest rates. "Real estate developers should be given quick clearances. Also, housing sector has been removed from priority sector lending. Back then, I had protested against it," he said.

Naidu said during NDA rule, the then Prime Minister, Atal Bihari Vajpayee [Unlink] had brought down interest rate from 16% to 7% for real estate industry. "Interest rates need to be brought down again," he said.

He also opined that the problems of the real estate sector, is a reflection of the problems that India faces. "There is a lack of decision making in the country. This is the reason for the present crisis," he said.

He said the NDA Government had taken India's GDP growth to 8.4%, which has now come down to around 4.5%. "There is fiscal account deficit, current account deficit and trust deficit. While people from outside are looking to come into India, businessmen from India are going outside. The Government should have clarity in mind," he said.

Naidu also said that CREDAI's demand for abolishment of urban land ceiling, stamp duty rationalization, priority lending to the real estate sector, should be taken up by the Government.

Fifth session - Urbanisation - Dream of Young India

Speakers
· Anurag Thakur, President, Bharatiya Janata Yuva Morcha and MP
· Lalit Kumar Jain, Chairman, CREDAI
Anurag Thakur, President, Bharatiya Janata Yuva Morcha and MP, today said that it is important for the real estate sector to grow, because it will create many job opportunities. "Overall growth today has come down. This needs to change," he said.

Thakur also said that India is experiencing urbanization at a fast pace. "When people come from villages to urban centres, they want to buy homes. The question here is are there enough homes and are they affordable?"

Thakur said when the NDA Government comes to power, it will improve GDP growth to 8.5%, which will in turn motivate people to buy homes. The BJP MP also pushed for more transparency in the real estate sector. Lalit Kumar Jain, Chairman, CREDAI, said the industry is victim of a corrupt system and not its beneficiary. "Real estate industry is transparent. We can debate on this," he said.

Sixth session - Road to recovery

Speakers
· Pankaj Bajaj, member executive committee, CREDAI, MD, Eldeco Infratsructure
· Vk Sharma, MD, LIC India
· Rajiv Sabharwal, Executive Director, ICICI Bank
· Vishal Kumar, MD, Xander Advisors India Ltd
Pankaj Bajaj, member executive committee, CREDAI, MD, Eldeco Infratsructure, said new home absorptions are not happening because of negative sentiment in the country. "I think like every other industry, there is some deferenc e of purchasing decision. Everyone is in wait and watch mode," he said.

V K Sharma, MD, LIC India, said that there is a clear signal of a slowdown in upper and upper middle segment of housing. "In the Rs 40 lakh-1 crore bracket of homes there is a strong demand," he said. "The basic issue that home buyers have is that developers are not maintaining timeline. If you are not able to stick to project timeline, then you will be redundant," he said.

On the issue of delays in projects, Rajiv Sabharwal, Executive Director, ICICI Bank, said typically projects with bank funding don't get delayed. "Projects usually get delayed because approvals don't come on time. The other reason for delay in projects is when a developer does not have financial closure for a project and is dependent on debt to finance the project. Bankers also suffer when delays happen," he said.

Vishal Kumar, MD, Xander Advisors India Ltd, said the mood among private equity players is very bad. "There are very few traditional players left now. A few years back, there were 132 PE players and today we might have 10 players, of which only 3 are doing PE deals while the rest aee doing debt deals," he said.

Kumar said PE players are however making good returns on the deals they are doing. "Earlier, if one out of 10 deals gave decent returns, now half of the deals give decent returns. Deals will be fewer but larger," he said.