Venue—Hotel Kohinoor Continental, Mumbai
Moderator—Pranay Vakil—Chairman Praron Consultancy
Atul Modak—Head-Kohinoor City
Gaurav Gupta—Director, Omkar Realtors & Developers
Jhumur Ghosh— National Feature Editor, Times of India
Ravi Sinha—CEO & Managing Editor, Track2Realty
Gaurav Gupta: I think you will have to take into account the historical background of real estate industry. All of us know historically real estate was never a professional industry in the country before FDI came in 2005. The industry was really fragmented and the industry was with small developers and it was more like a family business.
It was only post 2005, FDI came and the funds came in and people started professionalizing and that is how started the industry. Lot of calculations and lot of mistakes happen because of the right infrastructure not being implemented at best. If you look at in our country what is the eligibility to become a developer?
Pranay Vakil: Actually there is no eligibility to be a developer. Anyone can become a builder from tomorrow and worse anybody can become a real estate agent and call himself a consultant.
Ravi Sinha: Do you recommend the government should come out with entry barrier to regularize?
Gaurav Gupta: From a redevelopment perspective at least, yes. That will ensure speedy execution of projects.
Atul Modak: There are lots of professionals in this industry and there is lot of maturity as far as this industry is concerned. Things have changed and you have the best of the talent working in the sector. But the perception has not yet changed. Still people have the perception “oh we are going to a developer.”
Gaurav Gupta: I would say the perception of the people is still pre-2005.
Pranay Vakil: When we discuss the funding issue and the DCR, it also brings to the table another segment of real estate business and I have a question here. I have always seen the developers shy away from developing rental housing. Why so? I am saying in the context of what I have seen abroad where huge amount of rental housing in very organized fashion takes place.
There is a basic truth about rental housing that every city in the world has floating population and that floated population is not interested in buying in that particular city. So Gaurav, why you are not creating rental housing in the city of Mumbai?
Gaurav Gupta: Availability of finance is the major issue here, and like you rightly mentioned internationally you have REIT kind of structure in place, you have financial model.
Pranay Vakil: Ok. When you are talking about finance, you are talking about ROI or just the availability of finance?
Gaurav Gupta: Availability of finance. If you go to your lenders and you try to sell them the idea that I need this much of debt for this project, then this concept has not been tested in the country and the lenders will not support you because there has been not been a history. So, you need to create those kind of institution also who are mentally prepared to help.
Pranay Vakil: Atul why have you not gone for rental housing?
Atul Modak: I think my answer will be quite different from Gaurav’s. It is not just a matter of funding but return on the funds. Even today many investors are not buying apartments and they are more interested in commercial property due to higher returns. It is absolutely mismatch to think of rental housing here, unlike the US and other parts of the world. Secondly, there is no organized way of doing it as REITS is not available and thirdly there are lots of developers with hospitality background who started with service apartments and failed.
Gaurav Gupta: I think it is different business model altogether.
…to be continued
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