Real estate sector doing well in affordable segment, says Deepak Parekh
Making a strong case for supporting developers to help them come out of crisis, eminent banker Deepak Parekh said the government incentives have helped the affordable housing sector gain traction but home buyers now clearly want 'right developers, right price, right size and right financier'.
Parekh, chairman of housing finance major HDFC Ltd, also said the government's proposed Rs 20,000 crore fund will help the realty sector in a big way to get their pending projects completed and his company is very keen to contribute to this fund.
Asked whether he would also like to join the board to help manage this fund as a reputed industry voice, Parekh, however, said it was too early to comment on that. 'This fund, in which the government will put in Rs 10,000 crore and a similar amount will come in from public and private sector institutions, is a path-breaking move. The government is doing its best in supporting this industry and we have to get over the past sins of buying land at high prices and building luxury apartments. There is a limit how many luxurious apartments can be sold,' Parekh told PTI in an interview.
He also said the perception about the entire sector witnessing a slump was wrong as phenomenal sales were happening in the affordable and mid-market segment.
He said HDFC Capital Affordable Housing Real Estate Funds' (H-Care) USD 1.1 billion fund has seen strong traction for every project where it has invested across regions, including in Delhi-NCR, Pune and Mumbai, and most of the projects were sold within days.
The fund is managed by HDFC Capital Advisors Ltd, which is headed by Vipul Roongta and is a 100 per cent subsidiary of HDFC Ltd.
Abu Dhabi Investment Authority (ADIA) has invested 82 per cent, 9 per cent is by NIIF and 9 per cent by HDFC in this fund.
He said the magic wand behind success of these projects is that all these developers are reputed ones and the pricing and unit size was spot on.
'Where the demand transformation has happened, is that the customer profile has moved towards end users, because there is no appreciation and the rental yields on housing have come down,' Parekh said.
'Fiscal incentives have come for affordable housing, which are very beneficial. We feel more projects should be launched in this segment because the demand is insatiable.
'What is key in real estate which not many people have followed is, you have to have the right developer, which is people with good reputation and people who have delivered in the past.
'Then you need to have right sized units and right price,' he said.
Parekh said all eight or nine projects launched by H-Care have done well and there are more in the pipeline, all of them by reputed developers.
'This month itself, we launched a project by Signature Global in Gurgaon on September 13. We launched 680 units and within a week 30 per cent were sold. Price was Rs 4,000 per square feet and the starting price of the unit was Rs 20 lakh. That is where the market is. There is no point in building expensive units,' he said.
Even in Mumbai, developers need to make smaller units and they will sell, Parekh added.
Roongta said the lower margins in affordable housing are compensated by tax incentives and higher volumes.
He said most state governments are offering land at good locations and reasonable prices for affordable housing and projects linked to the Prime Minister's Housing Scheme.
'Ten years back, affordable housing was far away from cities, but now it is at decent suburb locations and even within cities. A combination of fiscal incentives and effective implementation of policies at state government level is making a big change,' he said.
'We are seeing people ready to buy right projects, in low to mid-income segments,' he said.
Parekh said, 'Some people are crying there is no demand, but we are seeing there is demand.'
He also said the government fund will help good developers finish their pending projects, which are non-NPA and non-NCLT.
Lakhs of homebuyers are yet to get delivery of their units as hundreds of projects across the country are delayed due to liquidity crunch and demand slowdown. In many cases, the projects have been declared NPAs or are under insolvency proceedings.
Parekh said, 'There are also many developers who might be about to default and so they can get the help here.'
'The difficulty if the NPA projects are included would be that in many cases of NPAs, the developers are not straight forward and how can a government-sponsored fund can finance those projects.
'There are some fraudulent or crooked ones and how do you distinguish between good and bad ones?
'But what I want to stress is that India needs developers to make housing, malls, offices and all, who you have to support them and hold their hands,' he said.
'With RERA etc, now there is some kind of rethinking, after what we saw over-exuberance in the past of buying land at whatever price... people bought land at exorbitant prices in the past.
'There are some developers who are genuine and who might have been under stress due to lack of sales, or they bought too much land in one go and are now getting hurt.
'The trust factor is so low among potential homebuyers today. But if a Tata, Mahindra, Godrej or a Shapoorji or a DLF etc comes with a project, they do sell. Even our projects are getting sold because they are with reputed developers. They are also telling the prospective buyers that HDFC has given funding and taken the equity,' he said.