The Confederation of Indian Industry (CII) in association with ANAROCK as knowledge partner organised the 3rd CII Real Estate Confluence on 17 and 18 February 2021. The theme of the conference was ‘Vision 2025 for Indian Real Estate’. The conference saw industrialists and real estate developers discuss the resurrection of Indian real estate post-COVID-19 and post-the Union Budget 2021-22,  opportunities, new trends and insights which will chart the way ahead. 

 

The session saw participation of speakers such as Mohit Malhotra, Managing Director & CEO, Godrej Properties; Dr Ajit Ranade, President and Chief Economist, Aditya Birla Group; Abhishek Lodha, MD, Lodha Group; Anuj Puri, Chairman, ANAROCK Group; Rohit Gera, MD, Gera Developments; Dhaval Ajmera, Director, Ajmera Realty & Infra (I); Murali Malayappan, Chairman and MD, Shriram Properties; Pushpa Bector, Executive Director and Head Retail, DLF; Patu Keswani, CMD Lemon Tree Hotels; Navin Makhija, MD, Wadhwa Group, among others.   

 

The real estate sector is one of the most globally recognised and construction industry is ranked as third and wields direct, indirect influence on all sectors of the economy. The pandemic has disrupted the Real Estate sector. Even post-unlocking from June 2020 onwards, the situation remained grim through September 2020 as construction activities were stalled due to labour shortage and sales were down. Also, site visits were not possible and real estate developers and brokers adopted digital platforms to launch new projects. The pandemic increased the pace of digital adoption in real estate. 

 

The unprecedented period brought the importance of home ownership to the forefront. The need of larger homes also led to better sales. Housing sales began to improve from October 2020 onwards due to upward demand and festive season. Also, the softening of interest rates on home loans to around seven percent and low housing process coupled with special offers were the positive factors that led to improved sales, though at a slow pace. Moreover, registration and stamp duty in the state of Maharashtra was a game changer. It was a significant catalyst for higher sales witnessed particularly in the Mumbai Metropolitan as well as Pune during the last three to four months. This is likely to continue as the stamp duty cut is applicable till March 2021. 

 

Mohit Malhotra, Managing Director & CEO Godrej Properties spoke about trends in the Real Estate space which could be seen over the next three to seven years. Firstly, the trend of consolidation is going to accelerate. The top 10 developers in India have a market share of around 11percent on a pan-India basis and this trend will gain speed. 

 

Secondly, the trend will see an emergence of large developers. Real estate is capital-intensive business and post-RERA it has become more capital-intensive and hence access to debt and equity capital is restricted to quality players. These aspects will further lead to consolidation. 

 

Thirdly, the real estate is becoming more customer-led industry. Earlier, access to land was the key success factor; however, today the entire focus is shifted to the demand side where customer is the king.

 

Godrej Properties is bullish about the future and believes large developers will become mega developers in future. The company has grown more than 14 times in the past 10 years and post- pandemic is very optimistic about the road ahead. A strong volume growth is expected in the next couple of quarters, following which prices for the real estate will start catching up. 

 

Dr Ajit Ranade, President and Chief Economist, Aditya Birla Group

 

The Union Budget 2021 was a landmark budget and pointed out five factors -- no new taxes; transparency in presenting the number; deficit spending to 9.5 percent in FY21 & 6.8 percent in FY22 and going down to four percent after four years; huge opening space for private sector through disinvestment and privatisation; and infrastructure push through the National Infrastructure Pipeline (NIP). 

 

Real Estate has become a more financial integrated sector. Post-COVID-19, the recovery in this sector has been at a faster pace. The sales in the residential sector were remarkable in  Maharashtra -- the highest in 10 years in December 2020, due to cut in stamp duty.

 

The fiscal deficit is ambitious, but the government still needs to fulfill the shortage of Rs 12 lakh crore though there is enough liquidity. There could be some upward pressure on the interest rate due to this. RBI will have to maintain enough liquidity to make sure that funding of the borrowing programme goes smooth but at the same time not have excessive liquidity so that it leads to inflation. 

 

The Union Budget has announced capital expenditure of Rs 5.5 lakh crore in the public sector, which is 25 percent more than the last budget. The year will also see execution of infrastructure pipeline. The major lookout will be investment made by the private sector. Aditya Birla Group has announced expansion plan of nearly Rs 6,000 crore in cement capacity. The company has also announced its foray into the paints business. 

 

Abhishek Lodha, Managing Director, Lodha Group

 

The recovery in the residential sector started with affordable and mid-income segment. The months of July, August and September 2020 were largely driven by this segment. The premium segment started picking up from September 2020. As of January 2021, the sector looks resilient across different segments of the residential market. 

 

With correction in the debt market, the real estate market is becoming structurally sound. The demand and supply are now driven by availability to sell as compared to availability of debt. 

 

Apart from this, the infrastructure offered by cities such as drainage, waste collection, playground for children, walk around, etc are weak. Hence, the role of townships has gained importance as people want a better quality of life.  

 

Dhaval Ajmera, Director, Ajmera Realty & Infra (I)

 

During COVID-19 huge demand was seen in Mumbai compared to Bengaluru, Ahmedabad, Pune and other cities. Bengaluru has been a steady increasing market. Pune also registered some growth in sales of units. In terms of sales by the company, Mumbai remained the front-runner, followed by Bengaluru, Pune and Ahmedabad. The demand for ready stock was witnessed across all the four cities. He noted that this is the right time to launch projects. 

 

Rohit Gera, Managing Director, Gera Developments

 

The company has chosen a different strategy and expanded its presence from Pune to Goa instead of entering Mumbai. The consumer profile, jurisdiction, buyer behavior is different in two states. Pune has a huge demand for child-centric homes, while demand for child-centric homes in Mumbai will be witnessed in distant future. Gera Developments is also expanding its footprint in Bengaluru and setting up IT parks. 

 

Pushpa Bector, Executive Director and Head Retail, DLF

 

Post-unlocking, the company started off slow, but the pace has picked up in Q3/FY21. The sales have now gone up to 75 to 80 percent. The numbers of January 2021 are almost 85 percent of the pre-COVID-19 level. Post-unlocking, the CyberHub has reached 70 percent of the previous levels. The overall scenario looks optimistic and sales will reach normal by June or July 2021. Moreover, pent-up demand will be visible in retail sector post H2/2021-22, following the roll-out of the vaccination drives. 

 

Navin Makhija, Managing Director, Wadhwa Group 

 

On the equity side for the residential sector, there is a lot of discussion going on by the company. The company has closed one deal and is in talks with for second transaction. There is a lot of interest from Japanese investors. Wadhwa Group is doing transaction on lease with Japanese conglomerate who are looking at setting up units in India. 

 

Murali Malayappan, Chairman and MD, Shriram Properties

 

The first half of 2020 for the real estate sector was a struggle due to restrictions imposed. However, Q3/FY21 has seen a bounce-back. The company has surpassed the sales of 1.19 million sq ft in Q3/FY21 and is targeting sales of 1.60 million sq ft in Q4/FY21. 

 

During the COVID period the company secured a second partnership from Mitsubishi Corporation. It has invested in one of the projects in Chennai and has come up with another project. 

 

The rebound has been witnessed on the back of various aspects such as stamp duty cut by the Maharashtra government; the support from Tamil Nadu government for clearing inventories and the Union Budget. The company is optimistic for opportunities in FY22.

 

Patu Keswani, CMD Lemon Tree Hotels

 

The impact of the pandemic was visible in the Hotel industry by mid-March 2020. Prior to the pandemic, the business was performing very well and occupancy level was 80 percent. In March 2020, it averaged out to 44 percent. 

 

Overall, the hotel industry had occupancy rate of 1,20,000 in January 2020 which saw a massive downfall to just 12,000 by April 2020. As much as 1,00,000 rooms were temporarily shut and  the overall revenue also fell. 

 

The company has its presence in 50 cities with 8,000-plus rooms. The 10 percent of the company’s business is from foreigners, which came to a standstill due to COVID-19. Post- unlocking, the traditional business has picked up pace post June 2020, especially in retail.

 

At present, retail business which is 40 percent of the business has bounced back, but at a low price rate. Half of the business from SMEs, which is 20 percent of the total, has also bounced back. 

 

By mid-2021, assuming the vaccination roll-out is at a higher rate, the business will see an upward trajectory. Excluding the business from foreigners, 85 to 90 percent of the business will be back on track in another seven to eight months. The bounce-back in pricing will happen only after six months. The sustain pricing and occupancy recovery will happen from FY23, following this the business will be strong in FY24 and FY25.