Anarock Chairman Mr Anuj Puri Exclusive Interview with Real Estate Guru
Fueling growth through innovation and leveraging new technologies and bringing transformation in Indian real estate is Anarock Properties. It’s one of the leading Indian real estate services companies with diversified interests across the real estate lifecycle and deploys its proprietary technology platform to accelerate marketing and sales. At a time when real estate is at its peak in Telangana, who better than ANAROCK to comment about the real estate game play in the state at the moment. The REG News exclusively conversed with Anuj Puri, Anarock Chairman about the impact of global recession on real estate in Hyderabad, rising skyscrapers, new realty companies entering the market and more. Excerpts from the interview:
A: I think it is a very interesting question. On the residential side, the sector continues to do very well. As the Covid came down, there was again a demand in residential properties and there was a steady graph across India, doing exceptionally well. In Hyderabad, all levels of housing were doing very well. The only unique problem in Hyderabad is the land availability, which is always a challenge and the pricing for which the land is made available becomes a beautiful challenge that how do you make sure that the math works for the developer given the high land rates and the sale prices not going up in the same proportion as the price of the land, but otherwise overall, in India Hyderabad is doing very well long dressy.
I think the important question is with the global economic slowdown, what is happening in the commercial sector? Clearly at a global level. There has been a huge model setback. Not only because of the slackness in the global economies where corporations are not taking more space, but also because a lot of the employees haven’t started to come back to work. Until you know, a lot of people are working from home. Currently, if you look at the US, a lot of European people have really started to come back to the office with a full floor. Price you move from west to east at a global level: you can see that there is more occupation of people coming back to the office. So, for example, if you were to look at Hong Kong, Singapore, India, you will see a lot of people have started to come back to work. So, one thing is there unlike Europe and the US where people are still working from home. We have a majority of our workforce, starting to come back into the office.
Certainly, the front office has come back fully, only the tech is still doing maybe three or four days in a week, but the majority of them in the major IT parks have come back. I think the bigger impact now is of the slackness or the slowdown in the global economic environment. Our thinking is that this is where India has started to do exceptionally well. Well, because the global capability centers of large US corporations who were previously not outsourcing to India have now started to source in India. So, we call them as GCC (Global Capability Centers). These are American corporations who were working in the US and doing the processing in the US suddenly saying “we’re not going to outsource it to a third party in India, we ourselves want to come in and we ourselves want to set up our own campus, our own office, our own employees. We want this to be directly under our control”, and that is what we have seen in the last one and half to two years. The GCC is really progressing well across India. So, the commercial demand that you are seeing is coming in largely from these corporations coming in through their own global capability centers. You know, they have a bigger campus inside the city. If they give it to a third party, they usually take very tight spaces per person. So, they would do maybe 70, 80 square feet per person, and the global capability center themselves will do 125, 150 square feet as a result of it. They take up a larger space.
I do have one concern of Hyderabad on the office side and that I would say is largely on the supply. Now if the entire planned supply which is on paper comes up, we don’t have that kind of demand stacking up for Hyderabad. Usually, what happens is that there is a difference between the actual built-up space of the office versus what is there on paper. So, if in the event, the paper supply is much larger than actually, what it gets built out of, then, we are okay, but if the entire paper supply that has been put together starts to get built up then. I think the concern is not on the demand but on the supply that there will be too much of supply at one given time that will hit the market.
A: A number of GCCs have come in and I would put it into three categories: these GCCs who have come in: Where Hyderabad is really benefiting is on the pharmaceutical side. The GCC centers of many of the Research companies, many of the pharmaceutical companies who have said right up have a preference to come into Hyderabad and that’s the first category.
The second category is really the financial companies. These are largely the banks – large American and European banks who set up the GCC.
The third category is the tech companies, who have become even more aggressive on outsourcing into India. So those are the three categories out of that. The first category, as I said, Hyderabad benefits from the pharmaceutical sector. The drug manufacturers, the researchers, the scientists. That is one segment that Hyderabad is able to pull a lot of. As far as the space is concerned, the demand, usually, in Hyderabad, hovers around 6 million square feet per year, so that’s about 60 lakh square feet of new office space that is leased net every year. Gross crosses even more gross, can be eight or nine million square feet, but net is 5 to 6 million sq ft. At this moment and time, the way that the supply has tagged up is like four five years of supply coming up together equal to the demand. So that means nearly two and a half-three crore feet of supply is planned. That is going to hit the market. As I said, is, you know, if this sort of phases out evenly, then there is no concern but all of it comes in as bunched together in one go, then we will have a problem because then you’ll have two and a half-three million square feet of supply hitting the market, but the demand is only sort of five to six million sq ft. So that means like four five years of supply hitting the market. The demand is going to be that much less.
A: So if there is a hundred thousand square feet of office space that is least out, we take it as a thumb rule that 100 square feet per person is the utilization of the office space by virtue of that it means that there will be a thousand employees in a one lakh square feet of space. So, a thousand employees could potentially mean a thousand home buyers potential home buyers Even if you would not take the thousand entirely you were to take 50% of it only. So that’s about 500 home buyers who are potentially there in a hundred thousand square feet of office. That’s how I would look at the calculation.
A: We haven’t yet. Seen any impact of the 2000 rupee note that had got banned, So, clearly in the demonetization, we had seen there was some issue, you know, back in the days. But when 2000 notes have got sort of banned, we haven’t seen any meaningful impact on Indian reality.
A: It’s been a question that has been asked for a very long time that you know, should the real estate sector be given an industry status. I’m not sure about the true benefits of it. One of the benefits that I am aware, is that if you do give it infrastructure status, the interest rates become a lot lower and hence it becomes a lot more palliative for the developers to be able to take up the debt.
But other than that, you know, it is being considered as an industry today. By the government. I do feel that there is not much that is going to be secured by real estate, getting an industry status apart from just the benefit that you get on the interest.
A: I think the fundamentals remain the same across the cities. If you look at it from the various stakeholders, whether it is the developers, who had better governance, who had financial discipline and focused on delivery and clients have done well across each of these markets and zones. Or, if you would look at the occupier profile, here it is very similar. It is a mixture of multinationals and domestic. It’s not only IT, it is now moving on to global capability centers and a lot of the front office in India that you’re seeing many of the Indian companies continue to expand. So, the profile of occupants is the same and likewise the profile of the home buyers is the same. The only apprehension I would say is largely Bombay and to some extent Gurgaon where the high-end luxury residential, if you move away from the office, does exceptionally well. For example, in Bombay, apartments that sell very well, 40-50, 60 crore rupees and they sell very well in large numbers, likewise in Gurgaon, we have seen that the market has really emerged for the luxury segment which we don’t yet see in many other cities including Hyderabad. We’ve not seen that kind of propensity to buy luxury homes in terms of the apartment values.
There are several core strengths, but I will enumerate three: First is the quality of talent you get in Hyderabad. It also has a lot of people that are migrating into Hyderabad. So, Hyderabad is becoming a source where you are able to attract a lot of talent from various other cities in India. So that’s the first thing that attracts them is the quality of talent is phenomenal. Second is the infrastructure, whether it is the airport or the roads or the metro or the social fabric and metro or security, it is really, really high up.
And third is, compared to many of the other metros in India, the cost of living is still a lot more economical in Hyderabad. That is what international companies look at. You know, is there enough talent for us to go in? How’s the infrastructure and by infrastructure, I don’t only mean physical infrastructure. I also mean social infrastructure: are there enough for healthcare? Are there enough entertainment facilities? Are there any educational institutions in Hyderabad? And if you look across the board, whether it’s hospitals or schools or colleges or hotels or retail malls, there is enough social fabric, and the other aspect is how expensive is it to do business in Hyderabad? In terms of the cost of doing business Hyderabad is still more economical compared to some of the other cities in India.
A: There are a number of Indian developers across the board who are really wanting to come into Hyderabad. Previously, as you rightly said, it was the southern based companies Bangalore-based companies, it was more Purvankara, Prestige, Brigade, or, Shobha many of these are the ones who were really showing in because, these were big boys from Bangalore who wanting to come into and set a space in Hyderabad. Today, we are seeing a lot of the Bombay developers wanting to come into Hyderabad. So, whether it is the Raheja’s or the exploration we see from Lodhas wanting to explore Hyderabad.
It is a very international market. It’s also a very deep market. It’s also a market which has sustained demand. Hyderabad realty market, you know, if you would look at Hyderabad really at night, you know, it looks like the New York skyline. The skyscrapers, the lights, the beautiful buildings, the facade of the buildings, the occupy profile in these buildings and it does look like you know you are in Manhattan. The way you know the city center in Hyderabad has really emerged clearly five years from today, this will truly become a much more internationally acceptable city. Look at the quality of infrastructure, the quality of manpower and real estate. I would say it is a lot more affordable compared to many other cities in India. I am a big fan of this city. I do feel that in the next five years, this city will continue to grow and will continue to gain even more momentum.
A: I’m a big supporter of RERA. RERA is really, really cleaned out. There were a lot of mistakes that were being made in real estate by the players in the real estate fraternity and I think the way Rera has flushed them out in states where Rera is a little bit more mature, more advanced came in perhaps earlier as well. For example, Maharashtra, Where RERA helped the market grow and was able to bring in transparency, because the home buyer has had a lot more confidence in those markets, given the way the authorities have really worked in the more mature markets, where Rera has been implemented for some time.
Now, In the South, the other markets, where RERA is now picking up momentum and we are finding the right leadership taking up starting to see is the progress. Anything which does not have RERA approval should not be marketed. And if it is marketed, then you have to be prosecuted because that is how you are going to be able to bring in self-discipline within the stakeholders. And you are going to be bringing in the confidence from the home buyer. So my thought is that if anybody is doing it any you know, sort of stakeholders are launching projects without greater approval, I think the authorities should be very strict to be able to make sure to flush it out and that there is no such event, or episode where you then have faltering developer who did not go through the radar, but don’t it to a discerning home buyer.
I think the majority of these stakeholders and majority of the players will just want to do it. Just like in a classroom, there will be one or two students who are going to be indisciplined. I’m sure there will be one or two developers who will do masti and who would launch without the RERA approval. But as I said, I think the authorities need to be extremely strict to not allow such a process.
A: We are a new age real estate services company that we set up. We are largely focused on residential sales through technology and digital. We sell about 21,000 homes every year across India. We have other facets that help the real estate sector which includes our capital markets that help raise debt and equity for the developers to do land acquisition for the developers, to be able to help them value that land, do best land use visibility and then to be able to help them if they are doing retail malls, or hotels or offices to be able to find the end user.
Hyderabad has been a special market for us to do a lot of work here on the residential sale side. We have bought in our innovative protect solutions in Hyderabad. It is also a market, which is basic, very versatile on the industrial, warehousing logistics side and, you know, clearly a market on the office leasing side which continues to roll.
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