CEO SPEAK - `We expect GST to have a positive impact on the sector'
Pankaj Bansal, director of the NCR-based Gurgaon major, M3M, said in an interview with Times Property that the market will improve in a couple of quarters from now, as the interest rates will come down further.
The delay in construction of housing projects by developers has affected sentiment in the sector, but as soon as construction is complete and flats are offered for possession, market will see sentiment pick up fast, Bansal says.
Excerpts of the interview:
HOW DO YOU FIND THE SECTOR PERFORMING AT PRESENT?
Today, the sector faces a lot of hardship, mainly due to the delay in completion of projects which, in itself, is owing to several factors--not all of which are due to the developers alone. However, now that developers are working overtime to complete their projects, the situation will improve soon.
MARKET PRICES HAVE FALLEN. HOW DID THIS COME ABOUT WHEN FRESH SUPPLY OF HOUSING UNITS IS NOT KEEPING PACE WITH DEMAND (OWING TO DELAY IN CONSTRUCTION OF EXISTING PROJECTS)?
Where requisite infrastructure like roads, sewerage, water, electricity lines have not come up but developers have handed over projects, like in Gurgaon, prices have not gone up as per expectation.
At the same time, where infrastructure is up to the mark, the bunching of deliveries has affected prices in Noida, where no deliveries could be made during the greater parts of 2014 and 2015, due to the order of the National Green Tribunal.
But, this does not mean that there is no demand or that demand has declined. Soon, as the sentiment improves, prices will start going up. I am certain!
DO YOU THINK BETTER DAYS ARE AHEAD FOR THE SECTOR, ESPECIALLY IN VIEW OF THE VARIOUS INCENTIVES GIVEN TO IT BY THE MODI GOVERNMENT?
India's realty sector has already started to show some encouraging signs and we are expecting strong growth ahead. It can very well be credited to the Modi government's initiatives like step-by-step liberalization of the FDI norms in construction and development over the past two years, focus on affordable housing, a strong regulatory act and, now, the GST.
With the government's determination to streamline the nation's overall economy and bring transparency to the real estate market, the sector is likely to see robust growth, going ahead.
A NUMBER OF CORPORATE HOUSES, NOW IN THE MARKET, CAN BE MORE EFFICIENT AS THEY CAN RAISE FUNDS AT CHEAPER RATES THAN THE TRADITIONAL, FAMILY-OWNED BUSINESS HOUSES. IS THIS A CHALLENGE FOR THE FAMILY-OWNED COMPANIES?
Competition is good. But, to my mind, real estate will remain a regional business where credible local players will continue to play an important role. I hope that with RERA in place, the government will accord the sector industry status, which will help traditional players also to borrow at competitive cost. After RERA, there will not be much difference between corporate players and other traditional players, in terms of transparency.
However, this does not mean that there would be no consolidation. That is bound to happen. What I want to say is that good, traditional, family-owned firms will also remain in the market. Overall, the entry of corporate houses will increase competition and, hence, will bring down prices.
PROPERTY PRICES ARE CURRENTLY DOWN. IS THIS A RIGHT TIME TO INVEST?
The Modi government has taken a number of steps to improve economic activity, especially in the manufacturing sector. The economy has shown some very encouraging results, as there are indications that it will turn around. A high economic growth will give the much-needed stimulus to the sector; with strong growth on the cards, property prices are expected to go up. Interestingly, demand from the end users has not slowed down but, as investors are exiting, this is not visible.
WHAT WILL BE THE IMPACT OF THE GST REGIME ON REAL ESTATE?
We expect the GST to have a positive impact on the real estate sector. The expected free flow of credit against the tax paid will be a primary reason.This should lead to an increase in the margins in the hands of realtors. Seamless and uniform transactions across states will help in cost rationalization. The GST will be useful to end users or buyers, too, as the uniformity that will be brought about by it will help them. But, the stamp duty should also have been included in the GST.
WHAT ARE THE FUTURE GROWTH AND EXPANSION PLANS OF YOUR COMPANY?
As of today, the company's total area under construction is in excess of 1.2 million square metres--but we are focused on tomorrow. We are planning to add another 3 million square metres to our development portfolio through landmark projects. While we are currently developing residential and commercial projects, we are beginning to step into SEZ, mixed-use development, and education segments as well. We will deliver around 2,000 units by March, 2017. The group has around 2,400 acres of land in the NCR. We are also negotiating with a number of players for joint development. In the coming days, the activities at M3M will increase substantially.