Mumbai, one of India’s most liveable cities, needs to go vertical, according to Surendra Hiranandani, chairman, House of Hiranandani. The company is developing large projects in Mumbai, Chennai, Hyderabad and Bengaluru. He believes that without the development of infrastructure, no Development Plan (DP) can be successful. Excerpts from an interview.
What is your view on the recently-unveiled DP for the Mumbai Metropolitan Region?
No DP is good. At the end of the day, it’s not the DP but the infrastructure that comes into play. Unlike any other city in the country, Mumbai is blessed with water, and a reliable electric supply and public transport system. Credit should go to the government for implementing the Metro projects, which will change the city’s character. They expect private car usage to reduce by 30%, but I would say the reduction will be greater.
How justified it is to exploit salt pan land?
We have to. Every country does it. We have a large population and it is better to concentrate the population than spreading them out into agricultural lands and far away into the landscape. We cannot afford the urban development you see in countries like the U.S., where villages have big houses with swimming pools. We don’t have those resources. We have to have high-density development to make things viable: public transport, education, health, recreation. The poorer you are, the higher the density, the richer you are, the more spread you can achieve.
You have seen Mumbai getting oversaturated on account of migration…
It’s not as congested as Manhattan. Even Barcelona, the old city, is denser than Mumbai.
Is Mumbai liveable?
Yes. It is still one of the more liveable cities in India.
But Mumbai is not an international-level city. As soon as you land at the airport, you see slums. We have to enhance our living standards.
It is the story of every city. But you have to do more of what works and what is already there.
Despite tight regulation, Mumbai’s buildings are caving in…
That happens in every country. In Korea, where everything is so advanced, a bridge collapsed. Regulations have been made quite stringent as far as structural design is concerned. The neighbouring building is so well built that nothing will happen to it. Even if the ground under the building caves in, it will still stand because it is anchored on rock. After 2000, India has adopted global standards to prevent such mishaps and has gone to a perfect level.
What is the outlook for the realty sector?
Two things will decide the future of real estate: interest rates and importantly, the overregulation of the sector. We are ranked 181 out of 189 countries in getting construction permits.
The State government is claiming that they have reduced many approval processes…
No. There are layers to be dealt with, within the municipality and various government departments. Nothing meaningful has been done to minimise the inconvenience. Look at the others and improve your ranking by making it easier to get construction permits. Till that is done, nothing will help.
How is the situation better in other States and countries?
All developed markets are streamlined; the processes are straight forward. As you go to emerging markets, you have all these issues. We are worse than African countries, in fact, we are in the company of war-torn countries like Syria, Afghanistan, Lebanon, Somalia where you go to the municipality and that building has been bombed. We are in the same rankings as those countries. Here, the bureaucracy doesn’t want to give up its power.
What needs to be done?
The onus is on the developer, but they are silent on regulatory delays. The regulations should be made very clear. There is no one idea that fits all so there has to be a soft approach to the process. And then we have the land department, where land records is an issue. The courts are also liberal in granting stays.
Are you optimistic about the Pradhan Mantri Aavas Yojana, for housing for all?
It is a challenge. Housing is affordable when there is no infrastructure. But how do you make housing affordable when the government has put up land for auction at the highest price? If there is infrastructure, land price will be high. Then you will have difficulty getting your approvals and your risk factor will increase. Any private equity investor calculates the returns he will get based on risk. They don’t earn money through taxes. The government takes taxes and prints notes. Even for a land sale, look at the government auction price.
You cannot just go where there is cheap land and build affordable housing there. There are challenges in getting the land and permissions. If government says there is land with all the requisite permissions, a huge number of companies will happily develop it. You have to make a profit, but government officials don’t like that word. They can be corrupt but you should not make a profit. So it’s wonderful to have Air India running at a ₹5,500-crore loss, paid by taxpayers. But if a business is making profits, it’s almost perceived as evil in this country. The government still has a socialist mindset.
‘RERA has made it difficult for young entrepreneurs’
The Union government has taken several initiatives like the Real Estate (Regulation and Development) Act (RERA), demonetisation and goods and services tax. Based on these, what is the outlook?
Anything new creates disruption in the short term because everybody has to adjust to new paperwork and processes. The supply chain was disrupted for three to four months. Many vendors were unable to computerise their accounts. With RERA coming in, a bigger player may take three months but a smaller player will take six months to do all the compliance work. So you have lost a lot of time in the short term but in the long term it is going to be beneficial.
Has the home buyer’s trust level gone up?
The buyer is 100% secure. The only downside of RERA is that a young entrepreneur who wishes to enter this business will find it difficult. You have to be an organised player. In an information technology company, nobody expects you not to fail. But in the real estate sector, you are not allowed to fail, because if you fail you go to jail.
When it is other people’s money, there has to be accountability. In the past, anybody could become a builder.
Still, 80% of the fault is not with the developer. Bad builders will always be there, like there are bad policemen, judges and ministers. Can we scrap all those institutions because of them?
Why is RERA an impediment for new developers?
You just cannot start and build your way up; you have to build something before you start, in terms of finance, compliance and your team. RERA has made everything more challenging.
