Brotin Banerjee, MD and CEO, Tata Housing Development Co Ltd, speaks to Ateeq Shaikh on various issues concerning housing industry, including a slowdown in sales due to Real Estate Regulation Act (Rera) and many developers stopping to sell their units. He also sheds some light on company’s new projects in the pipeline.
One of the positives of these policies and regulations is that it has brought back consumer trust and faith in branded developers. The trust that Tata Housing has built with its consumers over the years has helped the company emerge through this phase. Many of our projects that are two-three years away from completion have recorded good sales. Even the projects in critical markets have performed well.
We have witnessed consolidation of process over the last few years and would expect the same to continue for the next 3-4 quarters. We don’t expect too much of a price correction from branded developers and believe this is the right time for consumers to buy their dream homes as every developer is offering good deals right now.
We have finalised quite a few projects. We are hoping to add 8-9 projects this year in both affordable and premium, the two segments we represent through Tata Value Homes and Tata Housing, respectively. These would be a mix of brownfield and greenfield.
We are looking at 3-4 projects in the affordable segment. We are also waiting for public-private partnership policy on affordable housing to be formulated for the bidding out happening, which hopefully is likely to come out in the next couple of months. At least four of our projects will be in the affordable space (Tata Value Homes) and another 4-5 in the Tata Housing space.
These projects would be located in bigger cities like Mumbai, Delhi, Pune, Hyderabad. We are not looking at smaller, Tier II or III cities. These affordable housing projects would be on the peripheries of the cities and not in the city centre. For example, for Mumbai, peripheries such as Boisar, Vasind and Shahpur, these are Tier-III, but also outskirts of Mumbai but as well part of Mumbai Metropolitan Region. Both our companies — Tata Housing and its subsidiary Tata Value Homes — will continue to expand their portfolios across the 10 metros and emerging cities.
Under the Real Estate (Regulation and Development) Act 2016, one of the new things which we will have to do is that townships or very large developments will not be favoured, at least for some time. So, more medium or optimally-sized projects will be there. So even in the affordable housing sector, earlier we used to look at 50-60 acre, now, we are looking at 15-30 acre. This also being done in phases, in order to comply with all the guidelines.
We have platforms where we already have investors. I would think that between Rs 600 crore and Rs 800 crore we are likely to look at investment to fund these projects. We will be deploying and not raising this amount to acquire new projects.
Yes, we are looking at joint venture, joint development and outright opportunities, all the three routes are being explored and also being discussed. These 8-9 projects in the pipeline will be a mix of all the three options that we will be launching this year.
Many of the term-sheets have already been signed. Due diligence is on. You would get to know within this and the next quarters as we would announce 3-4 of them.
They are far more reasonable now about valuations and land prices. This is one good thing that has happened due to the slowdown. Hopefully, rightly priced projects or land banks can be acquired and rightly priced inventory can be sold. Many of those who have access to very large land banks and do not have use of that land banks due to the slowdown or their plans have changed due to new regulations feel that it’s better to consolidate and focus on a few, complete them and then move on. Some have loans that are outstanding against those land banks; they want to reduce their loans because of pressure from the banks. So it’s a various mix that leads to seeking collaboration, partnership or outright.
Under Rera, the companies are focusing more on the compliance aspect; as a result, there has been a slowdown in sales in the industry. Not because they are new compliances, but these are new regulations and documentations that are required. Once the project is registered under Rera, there won’t be any issues to market it. The most important thing is the intent of the developer. If the intent is clean, developers will not have problems with the new Act. I would hope that you would see much better sales this quarter than what it was. Since the regulations will also put delivery timelines in place, buyer sentiments are expected to improve further and the trust between home buyers and developers will strengthen. In addition to Rera, if gaps in easy access to land, financing and reducing the cost of construction are addressed, it will truly strengthen the real estate sector. Large brokers with whom we work are pan-India brokers, who are already registered. You even have to understand that regulations have not come out everywhere and are not uniform across all markets. So, the evolution of the regulations is also on, some have just been proclaimed, some have not become an Act. In key states, it’s in various stages, so it will still evolve over time.
Now, you can’t market it. We have been constantly innovating in our range of products in both value and premium segments in the form of themed homes or India’s first wellness homes. Our focus on customer centricity has led to favourable results. As you know, one of the things is that over the last three years our digital push has been enormous, that’s where we have pioneered besides affordable housing. I mean the digital platform, you may be aware that we have sold over 2,000 homes in the last three years through the digital medium. So on digital, you can go directly to the consumer. Thus, it’s business-to-consumer directly, you don’t need any intermediaries. Secondly, large brokers or broking houses with whom we have enduring relationships are already registered, so we don’t need to worry. Thirdly, we have made it very clear that if a broker brings in a customer and if he is not registered under Rera we will not be able to do it. We will not take them on board, we will comply and ask them to comply.
Tata Housing has around 30 projects across the country to be complied under Rera. We have initiated the process of registration for all our projects.
In the last 3-4 months due to Rera compliance, a large number of developers have stopped selling their units. This has resulted into piling up of the inventory. We will hopefully see new launches with the festive season coming up.