Real Estate in India: A Journey of Hard Work and Potential
In a candid conversation, prominent figures from Bengaluru's real estate sector share their experiences, challenges, and optimism about the future of the industry. They discuss the tough work involved, the thrill of creation, and the growing demand in the
Real EstateIndiaDevelopmentChallengesFutureReal Estate MaharashtraOct 15, 2024
Shankar, along with Prestige MD Irfan Razack and WeWork India CEO Karan Virwani, shared their insights and challenges in the real estate sector. 'I wouldn’t say real estate is easy and it is a lot of donkey work also,' Shankar stated. She emphasized the demanding nature of the business, which involves extensive paperwork and navigating a complex regulatory landscape.
Razack, with over four decades of experience, echoed her sentiments. 'It is the most difficult business to be in. You need to secure hundreds of licenses for every piece of land you purchase, and you must have the diplomatic skills to handle various stakeholders,' he said. Despite the challenges, Razack finds joy in the creative aspect of the business. 'What I love most is creating something from scratch. It’s a barren piece of land today, and tomorrow it’s a bustling community. That’s what energizes me,' he added.
Shankar also shared her personal journey. 'If you ask me today, do I love what I do? Yes, I love what I do. But it has been a journey, and I’ve learned to love it,' she said. She highlighted the difficulties in executing affordable housing projects. 'It is very hard to do so-called affordable housing. The definition of affordable housing is around ₹45 lakh, but with rising land prices, most projects end up costing around ₹60 lakh,' she explained.
From a customer's perspective, real estate is considered a relatively illiquid asset due to high transaction costs and long-term capital gains taxes. When asked for advice to aspiring entrepreneurs with a ₹10 crore corpus, the leaders recommended exploring land aggregation and joint development with existing landowners. 'If I had ₹10 crore, I would look to do a Joint Development Agreement (JDA) with someone who already has expensive land, especially in a small CBD property. You can use the ₹10 crore as equity and secure the rest as debt from a bank for construction financing,' advised Shankar.
The trio remains bullish on the future of the real estate market in India. 'With the population in this country, we are just at the tip of the iceberg. There is a lot more urbanization to come, and many more people aspire to buy a home,' Razack said. Virwani added, 'The demographic volume is so high that it’s a multi-decade opportunity. Given India’s population and growing aspirations, it is physically impossible to build enough capacity to meet the demand.'
Shankar pointed out that Bengaluru has an inventory overhang of 3.5 quarters, but securing approvals for new projects takes an average of 9-12 months. 'All the inventory we have will run out if we don’t launch more projects. That’s the kind of demand we are seeing,' she said.
According to the World Bank's Country Director for India, Auguste Tano Kouamé, by 2036, India’s towns and cities will be home to 600 million people, or 40% of the population, up from 31% in 2011. Urban areas are expected to contribute almost 70% to the GDP, and nearly 70% of the urban infrastructure needed by 2047 is yet to be built. This projection further underscores the potential and challenges in the real estate sector.
Frequently Asked Questions
What are the main challenges in the real estate business in India according to Nirupa Shankar?
Nirupa Shankar, Joint MD of Brigade Group, mentioned that the real estate business in India is a lot of 'donkey work,' involving extensive paperwork, obtaining numerous licenses, and navigating a complex regulatory landscape.
Why is it difficult to execute affordable housing projects in India?
According to Nirupa Shankar, affordable housing is defined as around ₹45 lakh, but with rising land prices, most projects end up costing around ₹60 lakh. This makes it challenging to execute affordable housing projects.
What advice do real estate leaders give to aspiring entrepreneurs with a ₹10 crore corpus?
Real estate leaders recommend exploring land aggregation and engaging in Joint Development Agreements (JDA) with existing landowners. They suggest using the ₹10 crore as equity and securing the rest as debt from a bank for construction financing.
What is the future outlook for the real estate market in India according to the leaders?
The leaders are bullish on the future of the real estate market in India, citing the country's large population and growing aspirations. They believe that the demand for housing is a multi-decade opportunity and that it is physically impossible to build enough capacity to meet the demand.
What is the projected growth of India's urban population by 2036 according to the World Bank?
According to the World Bank's Country Director for India, Auguste Tano Kouamé, by 2036, India’s towns and cities will be home to 600 million people, or 40% of the population, up from 31% in 2011.
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