Interview Point: PNC Menon, Chairman-Emeritus of Sobha Ltd feels India offers a great market for the NRIs but the demonetization will push investors to look at Dubai properties. Excerpt of an exclusive interview with Ravi Sinha.
Ravi Sinha: How do you see the impact of demonetization on real estate market?
PNC Menon: The impact on the economy will be significant as a large part of the black economy would become part of the Indian economy. This is certain to reflect in next year’s GDP figures. The attack on black money through demonetization is also expected to boost government revenues in a significant way. With a large part of unaccounted cash coming into the system, a lot more money will become accountable and taxable than was the case earlier.
Ravi Sinha: Will it really affect the real estate investment cycle?
PNC Menon: As such, we expect a surge in Indian investments in Dubai property as a result of the recent shift. Now that the money is legal and cleansed, people are looking at various new avenues to recover some of their losses and ROI that is tax free is very attractive for obvious reasons.
Ravi Sinha: Any specific reason why you are so bullish on Dubai property?
PNC Menon: Dubai is now a very sought after destination to invest in tax-free property with solid returns for Investors and also for end users who are looking at a second home. For example, our flagship project, Sobha Hartland, is expected to provide the profit that end users and investor seek. In fact, a two bedroom apartment is estimated to yield more than 2.3 lakhs of tax-free rental income every month plus the annual advantage of 20-30% capital appreciation.
Ravi Sinha: To what extent the Indian real estate market is attractive for investors?
PNC Menon: India’s real estate sector has matured to a point where NRIs are now able to invest in a wide variety of products, across the affordable, mid-range and luxury segments. Based on our 22-year presence in India, NRIs continue to represent a healthy proportion of our client base, primarily due to our focus on delivering global quality standards which ultimately generate attractive returns for our investors. With tighter regulations, greater transparency, more affordability and enhanced price stability, NRIs will find interesting investment opportunities, as long as they have a long-term view and are discerning about which project to invest in.
Ravi Sinha: A number of NRI investors are not that bullish on the Indian property market for some time now.
PNC Menon: India is a huge market with over 1.2 billion people and an emerging economy on a global front. When we entered the Indian market in 1995, we had a clear vision to transform the way people perceive quality in the real estate sector. We were even then conscious that by introducing international quality processes at affordable prices without compromising on delivering a developer can capture a big market.
Ravi Sinha: Amidst cycle of uncertainties what is your mantra of survival in real estate?
PNC Menon: I have just entered into the UK market. But the two markets where I mostly operate – India and the Middle East – goes through cycles of uncertainties after every few years. The answer to survival issues lies in the somple business philosophy of not over-leveraging. In a business where the conventional wisdom of debt-equity ratio has gone for a toss, one of the important lessons that I have learnt is that if you have $100, you should not borrow more than $50.
Ravi Sinha: Dubai and UK markets are different altogether. But does the perception of Indian market ever bother you?
PNC Menon: I am concerned with the overall poor perception and projection of the realty business. And it is time we must in our collective spirit take some steps to instill trust factor.
Ravi Sinha: Do you think the homebuyers are getting unreasonable today in the wake of consumer activism? Any suggestions to improve trust quotient?
PNC Menon: The homebuyers are not unreasonable consumers to expect houses to be built in a year. However, they expect an update and constant communication along with transparency. We can think of updating customers on a monthly basis with photographs of completed construction levels. A YouTube link can be created to offer them live feed from the construction site. Depending on the size and complexity of the project, it varies from 36 to 60 months. Developers can always have a flexible timeline for possession in their contracts.
