We are planning to invest in data centres along with IT parks as there is a strong need for strengthening of digital infrastructure.

- Amit Parsuramka

Senior Vice President & Chief Sales & CRM Officer, Tata Realty & Infrastructure Limited

What are the key continuing challenges which you foresee impacting the economy as a whole, and the real estate sector post easing out of lockdown in stages?

The pandemic has caused disruption for longer than the anticipated period. The real estate sector, which forms the backbone of several other industries, has been one of the worst hit as all construction came to a grinding halt. This lockdown period has further aggravated the problems of the Indian real estate sector, as it continues to struggle under the grip of severe liquidity crisis, unsold inventory, stalled and unfinished projects. The recovery prospects in H2 are high, provided Covid-19 spread is arrested and there is a vaccination prospect.

The overall lockdown has resulted in insecurities, potential job losses, deferment of decision to take real estate, capex reduction, delay in completion of projects, cost escalation due to interest payments, further artificial liquidity crisis cost of debt going up etc. causing overall sentiment set back.

Lockdown has also led to cost increase and delay in construction that lasts longer than the lockdown period. This is largely because workers wanted to return to their hometown, followed by the Monsoon season which restricted construction. All these factors could contribute to a slow recovery, next quarter onwards.

Are there any green shoots visible after the announcement of the stimulus packages / and RBI's rate cuts on the realty sector? Has it brought a positive change in the cashflow and the supply chain?

RBI has demonstrated agility by announcing measures to ease liquidity and they have certainly provided some relief. However, capital is still limited and would need to be rationed. Despite the lower interest rate the overall costing is still more than anticipated. Arresting the spread of Covid-19 and reviving the economy would remain challenging.

Tata Realty has been able to generate targeted cashflows. In commercial, we added 1 million sq.ft. leased space in the last 12 months and are likely to add another 1 million sq. this financial year. Our Net Operating Income has gone up by over 10% as a result of higher occupancy and increase in rents. We have captive demand from existing tenants for expansion. We have 3 million sq. under construction for commercial projects and 3 million sq. in residential. New projects measuring 2 million sq.ft. are likely to commence next 12 months. Financial closure is in place.

Cash flows are stable as we increased our sales over previous years by 40% and most of our projects are nearing completion or are ready to move in. New sales were down in H1 2020 considering the impact of Covid-19. However, as a company, employee and stakeholder safety is of utmost priority for us.

What is the expected time frame for the economy to be back to normalcy? What further measures / reforms should be undertaken by the states / central government?

The real estate sector was already dealing with its own set of problems which were aggravated by the pandemic. However, we anticipate the sector to start returning to normalcy only once the vaccine is found. Until then, it is wait, watch and adapt to the new normal scenario for most sectors. Several cash positive projects in the industry are stuck largely due to lack of capital and with no fault of developers. The cost of governance, compliance, capital and yet state government delays has made real estate unviable for many. Given the extraordinary circumstances, we have made representations to the government to initiate measures to-

Improve Developer Liquidity

- Reduce provisioning requirements for loans to real estate sector

- The flexibilities offered to the banks in respect of moratorium, deferral, etc. should also be passed on to NBFCs

- Foreign institutional investors should be allowed to directly invest in ready-to-move-in residential inventory for a period of 5 years

- GST input credit should be allowed for residential and commercial

Provide Stimulus to End-consumer Demand

- Subvention scheme for real estate should be restored

- Interest rate subsidy of 3% for all buyers of residential units for a period of 3 years

- State stamp duty on registration should be 2% only.

- Remove capital gain

- Allow deduction of interest paid to bank from rental incomes of houses.

Provide Stimulus through Taxation Measures- increase limits under section 24 b

Set more distressed funds

Abolish GST on JD Agreements to allow consolidation.

GST on cement should be reduced from 28% to 12%

While footfall increase in malls is taking some more time, production volumes have gone up in manufacturing sector, consumption is increasing , certain offline channels of distribution are up and running. Economy has shown signs of recovery in last few months and going by this pace, it will be back to pre Covid levels in a couple of quarters. Not to forget that India is a great consumption story and it is expediting the recovery process faster than anticipated.

Post gradual opening-up, how do you see the impact on the investment scenario in realty sector?

For Tata Realty, office, retail, warehousing / logistics have had robust demand. Office peaked in 2019 to 47 million sq. net absorption in 8 cities, which is the highest ever in the history of India. Due to low vacancy in office and warehousing, office demand may temporarily reduce in 2020-21 to 25-30 million sq. but shall bounce again. Residential sector has been distressed due to speculative developments in NCR, MMR and other cities. Earlier, speculators and investors used to buy residential properties but now only end users and select investors buy. Currently, RTMI inventory valued at approximately 1 lakh crores remain unsold. However, demand fundamentals of all segments remain strong, given the demographic dividend & urbanisation in India. The recovery of the sector will now have to factor the impact of Covid-19.

In the wake of the pandemic, our strategy is clear- to accelerate construction as and when lockdown is removed, in a safe manner. As a result of lockdown, some activities organically move to next financial year, reducing required outflow. We have already taken measures to reduce marketing expense and some expenses are deferred to next quarter respond responsibly to market.

What further measures, steps should the government undertake towards the migrant labourers and employment creation in the realty sector?

Government should provide a free rail travel pass (to and fro) with a 1 year validity to boost the confidence of the migrant labourers along with free meal pass per labourer for a limited time period in the state where he is seeking a job. State and central government should work jointly to address this problem. Modalities of the same needs to be worked out. Free medical check-up and access should also be provided specially to the migrant labourers. All these meaningful measures will help accelerate the return of the migrant labourers.

Post pandemic era how do you envision the transformation of design/ construction processes, marketing and supply chain management, especially with the advent of disruptive technologies? 

The buyers are now keen to buy from reputed developers or ready projects. Digital infrastructure is likely to enable sales considerably. A major transformation is taking place in the way real estate companies evolve and adapt to ‘the new normal'. This includes dealing with situations like the work-from-home scenario, change in consumer behaviour and digitalization of company processes, amongst others. Companies will have to take measures to encourage employees to make the most of work-from-home infrastructure, through Virtual Town Halls, setting up of telephonic and e-counselling for employees, self-help resources, online workshops and assessments to enhance their learning and development.

The Covid-19 pandemic is compelling the industry to look at wellness as a major priority area of building design and construction. As India slowly but steadily resumes work, developers need to consider all aspects of safety and upgradation of design features to accommodate measures that aid people during a pandemic.

What is your outlook for next couple of years?

While commercial real estate might be a tricky segment for a number of developers, we have been witnessing a tremendous response to our commercial assets. The company has close to 100 per cent leased portfolio of 6.2 million square feet, which is likely to be 20 million from existing land banks owned by Tata Realty. In addition to this, we have signed a few term sheets that would allow us another 14 million square feet. We are looking to build 45 million sq. of office space over the next 7-10 years.

Currently, our overall portfolio has more residential properties and the commercial segment accounts for 30 per cent of the total portfolio. We want to balance the asset diversification and expect to increase the share of commercial portfolio to 60-70 per cent of the total projects soon. We are also planning to invest in data centres along with IT parks as there is a strong need for trengthening of digital infrastructure in the post pandemic world.

Hits: 134