LIFETIMEACHIEVEMENTAwards Goes To…

Niranjan Hiranandani,
co-founder and managing director,
Hiranandani Group.

Niranjan Hiranandani controls the privately owned Hiranandani Group, along with his family members. He is ranked among the top 100 richest Indian's and Forbes global billionaires. The Hiranandani Group is responsible to have converted the Powai landscape into a haven for luxurious living in Mumbai. He is a renowned figure in the real estate sector.

Heartiest congratulations on being bestowed with the Lifetime Achievement Award at the Construction Times Builders Award 2017. Please describe your emotions.
NiranjanHiranandani: It is very heartening! I really feel humbled, when such awards are given. I only look at it and wish I was younger, so I could have bigger and longer opportunities than what I got. Fortunately, god has blessed me with good health. I am 67 and the time is running out. I hope the next 3-4-5 years or whatever time god gives me with reasonably good health, I would like to continue working (smiles).

How would you describe the changing trend post RERA?
NiranjanHiranandani: We must first start with the Prime Minister's vision of affordable housing for all, by the year 2022. It has to be the guiding principle of all directions, in which we all are moving. In line with this vision, the ministry for housing arrived at the decision that the building industry requires much more transparency and the consumers required more protection. Hence, the Real Estate Regulation and Development Act has been enacted and implemented.

The implementation has already started in the State of Maharashtra and certain Union Territories, and other States are now going to implement the same. The issue is how does the country move forward to create development machinery, while trying to achieve the objective of the PM, and simultaneously protect the customer, as well as, incentivize sufficient money inflow into the industry? These are various prongs of difficulties we are facing, which could also turn out to be opportunities. More than 6 crore houses require to be constructed, both in the urban and rural areas; with 2 crore houses in the urban and more than 4 crore in the rural areas. Unfortunately, more than 35% of this comes under the EWS segment, which rarely requires the kind of space subsidies, in terms of land availability. People can afford the cost of housing construction, but cannot afford the land cost, as it has gone way beyond their imagination.

The other aspect is the Government of India has come up with several programs, which give incentives in form of subsidy through interest subvention between 3 and 4% for housing, below Rs. 12 lakh. Along with various incentives, which are now being suggested at the State Government level, to fulfill the objective of affordable housing, hopefully will also incentivize private players to take part. The government, through its own machinery, is also providing affordable housing. So in the States like Maharashtra - MHADA, MMRDA, CIDCO are carrying out the work, while in other States, there are agencies like LIG, MIG and EWS, which are executing it. Affordable housing is now being defined and given an infrastructure status. In Mumbai and Delhi, the incentive status is only for 30 sq m. However, in the peripheral areas like Thane, Mumbai or MMR regions or any region outside Delhi, everything is 60 sq m carpet area, which is sufficient, in terms of affordable housing segment. This is a very big factor and a lot of construction in this segment is likely to take place.

It is adequately helpful to incentivize the private sector. The State Governments are needed to develop infrastructure in various places, because new areas will have to be allotted for development. Adequate amounts are being given to various cities, in order to improve their infrastructure and push them into becoming Smart Cities. In Mumbai region, for example, five major projects have been taken up. The first project is the Metro, where 160 km of metro rail will be added in the next 7 to 8 years. Cross Harbor Bridge will be undertaken. The RO-RO coastal road under consideration will go up to Mandwa and Alibaug area. The Navi Mumbai Airport project has got a green signal. All these infrastructure projects, which now cost more than 165,000 crores are projected in the next 6 years. So the infrastructure development pace in Mumbai region in next 5 years will be more than what was achieved in the last 65 years. This is a huge boost for creating basic infrastructure, which will trigger housing development in these areas. All these will work towards fulfillment of Prime Minister's vision of 'Housing for all, by 2022'.

The private sector is in a quandary. Land prices have shot up, development charges are very high, stamp duty is going up and ready reckoner rates or the circle rates have gone up so high, that all the additional FSI cost has gone too high. All these are needed to be rationalized, at least, in the case of affordable housing, and action from the State Governments or the local bodies are awaited.

Have you made any suggestions to the authorities?
NiranjanHiranandani: Yes, I have. Recently, I had a discussion with Haryana Government on RERA. I suggested, at least for five years bring in some discipline in the costs. The ministers were indicative to take steps to bring rationalization in this segment.

What are the possibilities to achieve the objective of affordable housing?
NiranjanHiranandani: We have not really incentivized rental housing in adequate measure. India is not a rich country and everybody cannot afford to have a house; yet, we expect for even the poorest of the poor will be able to get a house. Even in a country like America, more than 40- 45% people live in rental houses. Corporate organizations, charity organization, developers and State Governments should also incentivize creation of rental housing. Building metros in Tier II and Tier III cities should be undertaken, so that, people should be able to come to various cities for the purposes of work or employment and be able to stay on rent. There may be people, who are mobile due to the nature of their work may require moving from place-to-place. Every time you cannot buy or sell a house. Nowhere in the world does everybody buy a house. Rental housing could open doors for great opportunities. However, not enough incentives are given for this segment.

The Prime Minister's direction is right, housing construction will add at 1 to 1.5% to the GDP of India, in the next few years. It is also a labour intensive industry. Large numbers of unskilled and skilled people will get employment. There are 260 periphery industries, like paint industry, cement industry, steel industry, RMC plants, equipments shuttering, wood, wires, cables, tiles, porcelain, lights, lifts etc., which are dependent on our industry, so one must account for multiplier effect. This is what the Prime Minister also wants. It should not only be the direct effect, but also the larger indirect employment generation impact of a particular industry, which adds up to the GDP. There is creation of wealth in the nation. Say, if a person has a second house, which is given on rent, then it becomes an asset base, whose value will continue to appreciate.

RERA became necessary, because large number of consumers had been taken for a ride and this was probably more prevalent in the North Indian segment. It incentivized the government to quickly bring in this regulation. RERA calls for more transparency, which is the best thing that could happen. However, it immobilizes 70% of the money into an escrow account, which means, the companies which are strapped for liquidity will be further trapped for liquidity. However, in the long term, this will be good for rationalization and consolidation of the industry. It will definitely give more opportunities for growth and more good players will be incentivized to invest in the real estate business, due to the regulation and transparency of the business.

Do you presume demonetization and the '70% fund blocking' clause of RERA has led to drastic reduction in the buying capacity of developers? Do you see the GST Act adding to their woes?
NiranjanHiranandani: The destabilization of the industry, in terms of demonization, RERA or GST is definitely creating a disturbance and the ripple effect is being felt. There is no doubt the peace in economy, which is needed for the purpose of growth, has got disturbed. However, the intention of the government is to see the short term pain leads to a long term gains. Only time will tell, how it will really pan out. The government undertook demonetization with a noble intention to arrest black economy and reduce corruption. The taxation base has increased, because of it. More people are now under the tax net and many more will be added in the future. This is only going to benefit the economy and every citizen. In case of RERA, there will be transparency, ethical practices and discipline. The benefits of GST will go to the ultimate consumer. The middle men will move out of the chain and formal sector will become stronger.

What are the changing trends you foresee in Indian and global real estate market?
NiranjanHiranandani: We are automatically getting globalised. Today technology can be imported. We are entitled to import the latest technical equipment or make technological upgrades and we are able to bring in international contractors in the country. International inputs are entering the country and we are able to touch international standards. Today, huge numbers of skilled and unskilled Indian construction labour are working in the Middle East countries. They have already moved up the skill ladder. The volume of skilled labour's requirement in the next five years is going to increase so much that it will lead to tremendous shortage. Skilling of India needs to be taken up in a much more serious way by the government and the private sector, whether in
terms of government loans or in
terms of CSR activities by private companies.
FDI or FII's investment or project investments are now permitted in various sectors of the real estate business. The growth in next five years is going to be large. It will meet the aspirations of the people to get an affordable shelter. And this multiplier effect of income employment and security, in terms of, roof over their head will bring about growth opportunity in India, which will be highest in the world. Today, development in China has already come to a halt and it has tapered off. We still have a long way to grow. In the road sector, for example, we are talking about 40 km per day and we have managed to reach an average of 15 to 20 km per day. Railways will
seem more than 150,000 crores investment this year. A lot of
additional power generation is being undertaken. In the next 5 to 10 years, vast employment and income growth opportunities will be available to the youth of this nation.

What are the initiatives you have taken towards the skilling part?
NiranjanHiranandani: I am on the Construction Skill Development Council of India. Over and above, we run skill centers in various parts of Maharashtra. We have two institutions, one is under Hiranandani and one is a separate community board called HSNC Board, which runs 17 colleges. Under that, we are also doing particular work, which has been certified by the HRD ministry.

Is diversification on the cards?
NiranjanHiranandani: We are trying to expand and penetrate new barriers and create new products. We are also getting into industrial townships. The first one, we are planning to construct, will be in Talegaon, Pune.

It will be an industrial built-to-suit township with industrial standard sheds. We are looking at warehousing, we are looking at logis­tics and then, we are looking at industrial housing in one project, which is about 250 acres in Hinjewadi, Pune. The land part for the industrial housing complex is already taken care of. Ground leveling, compound wall and fencing is over. We are planning to start the project by the end of this year. Amongst the
housing developer community,
probably I will be the first one to formally get into this. It is slightly out-of-the-box concept.
Second generation of Hiranandani is initiating the diversifi­cation process. My son is doing the first float L&G terminal in Jaigarh, India. It is a 1,750 crores project, which is going to come up in the next one year, at Jaigarh port. It will bring L&G gas
in India.

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