Bottom Line: Brotin Banerjee, MD & CEO of Tata Housing feels despite of its significance, size and contribution towards India’s GDP, Indian real estate is still one of the most unorganised sectors due to its local nature.
In an exclusive interview with Ravi Sinha, Brotin Banerjee asserts that the entry of corporate developers are redefining the business that is the second biggest source of employment in India with more than 250 ancillary industries like steel, cement etc. connected to this sector. He says this sector is largely unorganised due to the presence of too many players. However, the sector is getting more and more organised every year with large corporates coming in.
Ravi Sinha: What are the challenges do you find in Indian real estate getting organised and corporatized?
Brotin Banerjee: The industry has dotted with innumerable challenges that need immediate attention and might affect the growth of the organised sector. The long and complex approval processes leads to huge time and cost overruns affecting the projects. Land acquisition coupled with lack of clear land titles remains a huge issue till date. The necessary infrastructural requirements for new projects are another issue that the developers might face. Lack of skilled labour and rising material and labour costs also affect the profitability of the projects. There is a need to address these concerns immediately in order to ensure viability of the projects and keep the corporates stay invested in the sector.
Ravi Sinha: Any hope in the near future for structured growth of the sector?
Brotin Banerjee: The government has eased FDI norms for the construction development sector, which is expected to provide a substantial boost to the sector in terms of greater foreign capital inflows. In the recent budget the government has proposed to allow foreign investment in Alternative Investment Funds, a category of pooled-in investment vehicles for real estate, private equity and hedge funds. These will lead to more foreign investments and investors entering India and help is building up of the organised sector.
Ravi Sinha: Has the presence of corporate conglomerates helped the sector in its quest for clean money and organised funding?
Brotin Banerjee: Corporate real estate developers are redefining the method in which property is sold today. Not just buyers, land aggregators too are more comfortable dealing with large corporations because highest standards of transparency and corporate governance maintained by corporate developers. Presence of corporates has definitely helped the sector in improving its image over the past few years. The sector has also witnessed increased flow of fund over the years.
Ravi Sinha: To what extent has corporate presence helped the average homebuyer on ground?
Brotin Banerjee: Over the last decade, the real estate sector has seen tremendous evolution with the entry of corporate developers. With constant innovation and consumer centric approaches, the corporate developers are trying their best to adopt industry best practise which would help in bringing the consumer confidence back in the sector. As an example, Tata Housing pioneered the concept of property development by corporates in India. Buyers, today are increasingly inclined towards purchasing or investing in projects developed by corporate houses.
These groups are committed to delivering projects on time and there is usually no compromise on quality. Also, the entry of more corporate in the sector increases accountability and competition, necessitating the delivery of better products and services. Moreover, the growth of this form of real estate will help to further structure the sector that is gunning for industry status.
Ravi Sinha: Corporate presence in the housing market may help earn trust on part of the homebuyers, but also threatens to make the houses costly. What is your take on that?
Brotin Banerjee: The entry of corporates has led to certain positive changes in the Indian real estate industry. Corporate presence enables buyers to take part in a transparent transaction by providing the consumer all the information required about the property. The large-scale real estate townships are designed to cater to market or consumer’s needs. The corporates have increasingly adopted global best practices and latest technologies in the building construction sector increasing the competitiveness in the market and therefore developers are compelled to innovate their offerings and services, which ultimately is beneficial the end consumer.
Ravi Sinha: What has been your experience in the sector that is by and large still unorganised and unregulated?
Brotin Banerjee:We at Tata Housing, are consistently looking at re-inventing the business curve. The company’s mission as a real estate development company is to delight customers by providing quality life spaces through continuous innovations. We have always thought it is important to build confidence in buyers by educating them and demonstrating a commitment to working in the best interest of the customer. We have always kept consumers at the center of our endeavours and strive to deliver projects on time and up to standards. In our quest to become a customer centric organisation, our efforts have been centred around identifying newer avenues for conducting business, reaching the customer through multiple channels thus ensuring we remain a name to reckon with in the Industry.
Ravi Sinha: Where do you see the Indian housing market heading to?
Brotin Banerjee:India has huge potential to attract large foreign investments into real estate. The Indian real estate will stay attractive due to its strong economic fundamentals and demographic factors. Enabling foreign Investments through Alternative Investment Funds & merger of FPI & FDI coupled with clarity on capital gains & pass through of rental income for RIETS would further enhance investor interest in this sector.
Though the industry expectations like infrastructure status & tax exemptions for affordable housing sector; higher personal tax exemptions towards housing loan & interest have not been extended; the outlay & allocations towards infrastructure & housing coupled with efforts to reduce unemployment & increase the disposable income of the poor will benefit the housing & in particular affordable housing sector.
