The Challenges and Rewards of Running a Real Estate Business in India

In a candid conversation with Zerodha co-founder Nikhil Kamath, leading figures from Bengaluru’s real estate sector shared their insights on the challenges and joys of running a business in one of the most dynamic markets in India.

Real EstateBengaluruProperty MarketAffordable HousingUrbanizationReal Estate MaharashtraOct 15, 2024

The Challenges and Rewards of Running a Real Estate Business in India
Real Estate Maharashtra:The real estate market in India has witnessed significant growth and transformation, particularly in the aftermath of the Covid-19 pandemic. Property prices are on the rise, and so is demand, especially in the luxury segment. But what does it take to run a real estate business in this dynamic and often challenging market?

In a conversation with Zerodha co-founder Nikhil Kamath on his show titled ‘WTF are Indian Real Estate Giants Up To?’, three prominent names from Bengaluru’s real estate community — Prestige MD Irfan Razack, Brigade Group Joint MD Nirupa Shankar, and WeWork India CEO Karan Virwani — provided some insights.

Nirupa Shankar, who has been a key figure in the Brigade Group, was candid about the challenges. “I wouldn’t say real estate is easy; it is a lot of donkey work,” she said. Her sentiments were echoed by Irfan Razack, who has been in the business for over four decades. “It is the most difficult business to be in. Every single land purchase requires securing hundreds of licenses. You need to be diplomatic and maintain a positive attitude even when faced with challenges,” Razack added.

Despite the difficulties, there are aspects of the business that these leaders find deeply rewarding. Razack explained, “What I love most is the creation process. Starting from a barren piece of land and transforming it into a vibrant community is truly energizing.” Shankar also shared her journey, saying, “If you ask me today, do I love what I do? Yes, I love it, but it has been a journey. I learned to love what I do.”

One of the significant challenges in the real estate sector is the execution of affordable housing projects. Shankar pointed out, “It is very hard to do so-called affordable housing. The definition of affordable housing is around ₹45 lakh, but with land prices, it often costs around ₹60 lakh. This makes it difficult to execute affordable housing projects.”

From the customer’s perspective, Shankar noted that transaction costs and long-term capital gain taxes make real estate a relatively illiquid asset. When asked for advice to aspiring entrepreneurs with a ₹10 crore corpus, the leaders suggested 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, such as a small CBD property. You can use the ₹10 crore as equity and get the balance as debt from a bank for construction financing,” Shankar advised.

The trio remains bullish on the future of the real estate market in India. Razack commented, “With the population we have, this is just the tip of the iceberg. There is still a lot more urbanization to come. A lot more people are aspirational and want to buy homes.” Virwani added, “The demographic volumes are so high that the demand will sustain for multiple decades. Given India’s population and growing aspirations, it is physically impossible to build enough capacity to outpace demand.”

Bengaluru, in particular, has an inventory overhang of 3.5 quarters, and securing approvals for new projects can take 9-12 months. “If we don’t launch more projects, the current inventory will run out, highlighting the strong demand,” Shankar explained.

According to 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.

Frequently Asked Questions

What are the main challenges in the real estate business in India?

The main challenges include obtaining numerous licenses for each land purchase, dealing with regulatory and bureaucratic hurdles, and managing the high costs associated with land and construction. Additionally, creating affordable housing is particularly difficult due to rising land prices.

What do real estate leaders find rewarding about their jobs?

Real estate leaders find the process of creating something from a barren piece of land to be deeply rewarding. The transformation of land into vibrant communities and the positive impact on people's lives are significant sources of satisfaction.

Why is affordable housing difficult to execute in India?

Affordable housing is challenging to execute due to the high cost of land. The definition of affordable housing is around ₹45 lakh, but with additional costs, the price often reaches around ₹60 lakh, making it difficult to keep the projects affordable.

What advice do real estate leaders have for aspiring entrepreneurs with a ₹10 crore corpus?

Real estate leaders recommend exploring land aggregation and joint development with existing landowners. Using the ₹10 crore as equity and securing the rest as debt from a bank for construction financing is a viable strategy.

What is the future outlook for the real estate market in India?

The future outlook for the real estate market in India is optimistic. The population is growing, and there is a strong demand for housing. Urbanization is expected to continue, and the demographic volumes are high, ensuring sustained demand for multiple decades.

Related News Articles

Godrej Properties Expands Bengaluru Footprint with 7-Acre Land Acquisition
real estate news

Godrej Properties Expands Bengaluru Footprint with 7-Acre Land Acquisition

Godrej Properties acquires 7-acre land in North Bengaluru, strengthening its presence in the city's rapidly growing real estate market.

July 2, 2024
Read Article
Rethinking Luxury: Transcon Developers' Innovative Approach
real estate news

Rethinking Luxury: Transcon Developers' Innovative Approach

Discover how Transcon Developers is redefining luxury real estate with its out-of-the-box office project, a game-changer in the industry.

July 27, 2024
Read Article
W. P. Carey Foundation Commits $25M to ASU's Real Estate Education
real estate news

W. P. Carey Foundation Commits $25M to ASU's Real Estate Education

The W. P. Carey Foundation and Arizona State University’s W. P. Carey School of Business are partnering to expand the scope, strength and reach of the school’s real estate programs.

August 12, 2024
Read Article
Mumbai BMW Hit-and-Run Case: Accused Mihir Shah Claims Detention was Illegal
Real Estate Mumbai

Mumbai BMW Hit-and-Run Case: Accused Mihir Shah Claims Detention was Illegal

Mumbai BMW hit-and-run case: Accused Mihir Shah moves high court, claims detention was illegal, seeks immediate release

August 19, 2024
Read Article
Murdoch's REA Eyes Bid for UK Housing Giant Rightmove
real estate news

Murdoch's REA Eyes Bid for UK Housing Giant Rightmove

Rightmove's steady revenue growth and the UK housing market's expected pickup as interest rates decline make it an attractive target for REA Group.

September 2, 2024
Read Article
RERA's Authority Over Unregistered Projects: Punjab and Haryana High Court Upholds Allottees' Rights
Real Estate

RERA's Authority Over Unregistered Projects: Punjab and Haryana High Court Upholds Allottees' Rights

The Punjab and Haryana High Court has ruled that the non-registration of a real estate project under the Real Estate (Regulation and Development) Act, 2016 (RERA) does not nullify the rights of allottees. This landmark decision provides clarity and protection for homebuyers in unregistered projects.

April 3, 2025
Read Article