There is a huge quantity of unsold inventory to the tune of 2.5 lakh units in Mumbai alone. Luxury Homes have hardly seen any growth momentum in the last few quarters despite a steep price correction. Housing for All by 2022, RERA and GST have been few of the most discussed topics in the country. Reduction of lending rates by banks and financial institutions has re-energized the real estate market but yet has to see definitive numbers.
Team NewsBarons connects with Dr. Niranjan Hiranandani, Founder & Chairman – Hiranandani Group and the Founder-President, NAREDCO (West) to understand his views on the above mentioned topics, Mumbai infrastructure development plan, possibility of affordable housing in Mumbai and more.
NB: Mumbai has a huge demand for housing and yet there are about 2.5 lakh unsold inventory. Can you cite the reasons for this?
Dr. Hiranandani: There are different segments as regards housing and the buyer profile that opts to buy the home. If ready possession homes do not fit the budget threshold of buyers, those homes will constitute unsold inventory. Most of the housing demand in Mumbai and the MMR comprise what is referred to as ‘affordable housing’, which also includes MIG, LIG and EWS segments. Compared to the demand for these segments, existing housing stock in the concerned segments is either under construction or still to commence construction. The unsold inventory is largely in the HIG segment, which is a different segment as compared to the unfulfilled huge demand for housing.
NB: Luxury Homes have seen hardly any growth in its segments and has rather seen steep price corrections even though it caters to a separate class who are not dependent on financial institutions or are affected by the change in lending rates?
Dr. Hiranandani: There is an issue with what is categorized as ‘Luxury Homes’ in Mumbai and the MMR – each new launch brings in more amenities and even more luxurious facilities. For example, we have launched new uber-luxury projects in Thane’s GB Road, which have changed the paradigm of luxury housing in that micro-market. Obviously, it will impact attractiveness of an existing luxury real estate project which may be offering last year’s amenities and facilities. One needs to understand that the luxury home buyer will not buy just because he/ she has the funds and does not need to take a loan. Higher the price point, more discerning the customer, and this is why traditionally, off-take of homes in the luxury segment moves at its own pace.
NB: With the implementation of RERA and GST, explain the impact of these on the housing sector?
Dr. Hiranandani: Implementation of RERA will bring in much required positivity, transparency and accountability on part of the developer, which in turn will enhance trust and confidence on part of the home buyers. We see positive impact on the sector which will be now regulated and operated in much professional manner.GST, which has been one of the longest awaited tax reforms; got unanimous approval of both houses of parliament and government of India has set a deadline of April 2017 for its roll out. Implementation of GST on track augurs Well for Indian Real Estate. From a real estate perspective, the positive here is that all other central and state taxes are intended to be subsumed under it. Given this aspect, GST will have far-reaching implications on real estate; one of the positives will be uniformity across various states.Though, the rate at which GST will be implemented for real estate would be worth watch.
NB: A recent report informed that there has been no considerable impact on unit sales post reduction of lending rates by banks and financial institutions?
Dr. Hiranandani: There is a positive sentiment which gets bolstered by reduction of lending rates by banks and financial institutions. This has impacted the residential segment positively, but interest rates were not the only reason why we were witnessing the impact on unit sales – take for example, demonetization, which has created a wait and watch scenario from the day it was announced. Intending home buyers will take some more time before they turn from ‘fence sitters’ to actual buyers. Similarly, the ending of the fiscal year means new home bookings slow down till we are in the new fiscal year. Effectively, buying will increase in numbers as we move into the new fiscal year.
NB: What is the current status on Housing for All 2022?
Dr. Hiranandani: Housing for All by 2022 is the most ambitious mission led by Hon’ble Prime Minister Shri Narendra Modi. It is a wonderful initiative, and in the Budget Speech, the Hon’ble Finance Minister has come up with positive initiatives and developers recommended proposals are already under consideration. Real estate players have proposed various proposals to the govt like making lands available for building affordable homes, industry status for the real estate which will augur long term funding, shift from built up to carpet area of the development, promising schemes to promote affordable housing which in whole will augment the growth of housing sector. Real estate is one the major sector contributing to the GDP growth of the economy at a faster pace and to grow it at a much higher rate it shall continue towards achieving dream of Housing for All by 2022.
NB: Is affordable housing possible in a metro like Mumbai considering high cost of land and development?
Dr. Hiranandani: On the day I presided over as Founder-President, NAREDCO (West), I had made a proposal to the Maharashtra state government – if the additional land can be availed to us at reasonable cost, we assure creating affordable housing. For example, salt pan lands in Mumbai and neighboring locations in the MMR can be the next affordable housing destination. So yes, affordable housing is possible in a metro like Mumbai, so long as we real estate developers create housing stock on such lands on a ‘no profit-no loss’ basis – which is something NAREDCO (West) members have already offered to do.
NB: Mumbai infrastructure has a slow development rate and is on the brink of collapse. What do you think is the way out?
Dr. Hiranandani: Over the last few years, we are seeing positive developments with various new infrastructure projects being initiated and launched as also previous projects being speeded up. An infrastructure project worth Rs 73,367 crore has been launched in Mumbai in calendar year 2016. Some of the key projects include Mumbai Coastal Road (Rs 13,000 crore), Mumbai Trans Harbour Link (MTHL) (Rs 11,500 crore), Mumbai Metro Phase III Cuffe Parade-SEEPZ corridor (Rs 23,136 crore), 18.5-km Dahisar to DN Nagar (Rs 4,994 crore), 16.5-km Dahisar east to Andheri east (Rs 4,737 crore) and Navi Mumbai International Airport (Rs 16,000 crore).
Incidentally, Maharashtra Chief Minister Devendra Fadnavis has set an ambitious target of commissioning of these flagship projects during calendar year 2019.
The Rs 13k-crore Mumbai Coastal Road to connect south and north Mumbai and ease traffic, especially on western express.
MTHL project to link Mumbai and Navi Mumbai where new airport is proposed.
The Navi Mumbai airport’s first phase, of 10 million passengers, to be commissioned by December 2019.
Three Metro corridors of 68.5 km to be operational by December 2019.
These major infrastructure projects commenced in FY 2016-2017 will foster better development rate.
Dr. Niranjan Hiranandani is the Founder & Chairman of Hiranandani Group and the Founder-President of NAREDCO (West).