‘Legitimate financial innovations must be encouraged’

One of the focus areas of Ashish Puravankara , Joint Managing Director, Puravankara Group , is to bring affordable homes of premium quality to middle-income consumers. He is also targeting to implement best practices in the construction arena in order to reduce project delivery time.

In an interview with Business Line , Ashish says the new Land Bill will affect industry more than the real estate players.

Excerpts:

How do you look at the current economic situation in the country?

India’s urban population of 285 million has multiplied five times during the last 50 years. That growth trajectory is expected to continue, so that 50 per cent of India is living in urban areas by 2030. The Indian economy, currently the world’s fourth largest, is projected to emerge as the third largest by 2025. By implication, the country will need more homes, offices, civic and infrastructure facilities to accommodate this growth. Much of residential real estate and infrastructure development will occur in and around cities. The country is already grappling with an estimated shortfall of 18 million housing units.

Economic slowdown notwithstanding, India's real estate sector is poised for significant growth in the coming decade as it benefits from substantial opportunities, including urbanisation, demand for new housing and expansion of Tier II and Tier III cities.

How is the real estate industry faring under such conditions, in your view? Especially how is the Bangalore segment faring?

Economic vagaries may have tempered consumer sentiment, but the need for a home remains unaltered. Properties which are priced prudently and well located will do well, irrespective of macro-economic conditions. Against this milieu, the prognosis for the real estate industry is encouraging. Sector ratings have been revised to stable for 2013 (from negative in 2012). Bangalore is an end-user driven market and residential real estate demand has been relatively resilient. We are seeing sustained buyer interest due to the relative affordability of the market. Bangalore accounts for nearly 70 per cent of the Puravankara Group’s revenues and all our local projects have done well.

Will the ban on 80:20 scheme effect the industry? Also, will it affect Puravankara in anyway?

Customers, particularly young professionals, have benefited from the 80:20 proposition, as it has reduced the interest burden during the project construction phase, while they are paying monthly dues on their rented premises. The ban precludes potential customers from availing themselves of this attractive proposition. Given the economic challenges, legitimate financial innovations such as this ought to have been encouraged.

With that said, we respect the RBI’s stand, in the spirit of safeguarding consumer interests against a few defaulting developers. However, a blanket ban penalises responsible developers who honour their obligations.

How will the land acquisition Bill affect the industry?

The Bill is an important step in safeguarding landowner interests, particularly that of farmers. Most residential, commercial and retail real estate projects encompass land areas smaller than stipulated by the Land Acquisition Bill. Therefore, I do not envision that developers will be significantly impacted by its provision. Evidently, the Bill will apply to statutory land purchases for infrastructure projects and SEZs.

Has devaluation of the rupee hit your business? How difficult/easy is it to market properties in these times and what is your strategy?

NRI demand has increased on account of dollar appreciation; the depreciating rupee has made properties in India almost 20 to 30 per cent cheaper.

The NRI segment constitutes about 25 per cent of Puravankara sales; we expect that trend to augment in the coming months. We have devised market-specific strategies to attract NRIs, such as focused digital marketing, mining our existing database and targeted Indian community-centric campaigns.

When did you enter the business and what changes have you brought about in the Group?

I entered the business in 2000 and have been instrumental in establishing Provident, the wholly-owned subsidiary which caters to middle-income housing demand. Brand Provident has several successful launches to its credit in Bangalore, Chennai, Mangalore and Coimbatore.

Driving construction efficiencies with the objective of reducing project delivery time is my priority. So is championing the customer experience through product innovation and value-added services. I intend to stay connected to strategic initiatives such as market expansion, process improvement, brand-building and customer engagement initiatives that will bode well for our brand and business.

What are your future plans for the Group?

In 2000, Puravankara was largely a Bangalore-centric developer. Since then we have expanded into Chennai, Kochi, Coimbatore, Hyderabad, Mysore, Mangalore and Kolkata. We are exploring market expansion opportunities beyond the South, primarily through the joint development route – Mumbai and Delhi NCR are of immediate interest.

Tell us about Provident housing and the milestones achieved. This being in the affordable segment, will you compromise on your strategy in terms of price points when it comes to Tier II and Tier III cities?

Provident Housing has morphed from a fledgling business segment to an organisation driver, accounting for over 33 per cent of the Group turnover. The proposition has been very well received - we have over 12 million sq ft of launches and delivered over 3.5 million sq ft of projects; our launch pipeline this fiscal year includes an additional 3.5 million sq ft.

The brand proposition is not merely affordable housing. Provident entails ‘premium affordable’ homes, including best-in-class amenities, at affordable prices. The genesis of Provident is the recognition that the upwardly mobile Indian is no longer content with functional homes but seeks affordable, lifestyle-oriented establishments. Provident is an idea whose time has come.

Provident Housing delivers affordable best-in-class homes not by cutting corners but by cutting costs, designing efficiently, reengineering each process of the construction and minimising wastage. We will carry forward this strategy into Tier II and III cities, so that our properties are competitively priced in each micro-market, based on ticket size.

Do you have plans for Delhi and Mumbai?

We are exploring market expansion opportunities outside the South, primarily through the joint development route. We have commissioned a sales office in Gurgaon to market our South-based proprieties, even as we evaluate market development potential. Mumbai and Delhi are markets of interest. We hope to establish our presence there in the near future.