The real estate market in India has seen notable growth and transformation in recent years, especially following the Covid-19 pandemic. Property prices are on the rise, as is demand, particularly in the luxury segment. However, have you ever wondered what it is like to run a real estate business in the country?
In a conversation with Zerodha co-founder Nikhil Kamath on his show titled ‘WTF are Indian Real Estate Giants Up To?’ three well-known names from Bengaluru’s real estate fraternity – Prestige MD Irfan Razack, Brigade Group Joint MD Nirupa Shankar and WeWork India CEO Karan Virwani – spilled the beans on challenges of running a business in the sector.
“I wouldn’t say real estate is easy and it is a lot of donkey work also,” Shankar said candidly.
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Others agreed. “It is the most difficult business to be in. Here (with) every single land you purchase, you need to get all the licenses. Some hundreds of them… you’ve to salute all the people that you need not…you have to have that mindset that even if somebody is bashing (you) up, you’ve to have the ability to keep smiling, and being nice and diplomatic about it,” said Razack.
However, Razack, who’s been in the business for over four decades, also revealed what he loves about his job.
“What I love most is you’re creating something…it starts from just a barren piece of land. And then you’re creating a scene, it keeps changing with scale. It’s that creation, what you’re doing and what you’re putting up is really what gives you that thrill. It energises you,” he said.
Meanwhile Nirupa Shankar said: “If you ask me today do I love what I do? Yes I love what I do. But it’s been a journey. I learnt to love what I do.”
Difficult to execute affordable housing projects
Shankar also explained why affordable housing projects are difficult to execute today. “It is very hard to do so-called affordable housing. Affordable housing is defined as some ₹45 lakh – plus everything almost comes up to ₹60 lakh – the way land prices are going it is very difficult to do affordable housing,” she said.
Also Read: Real estate trends: Will affordable homes hold out amid a luxury housing boom?
From the customer’s perspective, Shankar agreed that transaction costs and long-term capital gain tax make real estate a relatively illiquid asset.
When asked for advice to aspiring entrepreneurs with a ₹10 crore corpus, the leaders recommended exploring land aggregation and engaging in joint development with an existing landowner.
“If I had that ₹10 crore, I would also look to do a JDA with somebody who already has expensive land, maybe in a small CBD property. You can use the ₹10 crore as the equity you put in and then get the balance as a debt from a bank to do the construction financing,” Shankar said.
Developers bullish on real estate market in India
Responding to Kamath’s question on future of the real estate market in India, the trio enumerated why they hold an optimistic view for multiple decades to come.
“With the type of population that you have in this country, this is still, according to me, the tip of the iceberg. There is still a lot more urbanization that has to happen. There are a lot more people who are aspirationally wanting to buy a home,” Razack said.
He went on to further explain that unlike the older days, when he was largely selling homes to retired professionals who invested their PF savings into their home purchase, in light of the economic growth and job creation India is witnessing, demand has changed in today’s times.
“The volumes of the demographic are so high that it’s multi-decades,” added Virwani. He further elaborated that given the sheer size of India’s population and its growing aspirations, it is also physically impossible to build the kind of capacity where supply would outpace demand.
Also Read: Housing sales up 5% at 87,000 units across top 8 cities in Jul-Sep with Mumbai topping the list
Meanwhile Shankar highlighted that Bengaluru has an inventory overhang of 3.5 quarters, whereas securing approvals for any project takes an average of 9-12 months. “So, all the inventory we have will run out if we don’t launch more and more projects. That is the kind of demand that there is,” she said.
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, with urban areas contributing almost 70% to the GDP. Furthermore, nearly 70% of the urban infrastructure needed by 2047 is yet to be built.
