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Sairung Developers & Promoters Pvt. Ltd, which was established in 1979, has been offering investment opportunities on the outskirts of the city. Vivek Shesh, who has more than two decades of experience in management skills, talks about the emerging trends and investment destinations in the real estate sector in an interview with Lalitha Rao.
Bengaluru, Delhi and Mumbai have shifted from 10th, 12th & 15th rank to 19th, 21st & 20th position in the list of investment destinations, according to a PwC report titled Emerging Trends in Real Estate for Asia Pacific 2013.
The top line metros, in the last couple of decades, have got saturated as investment destinations. Prices have skyrocketed to an extent that not only is there very little scope of appreciation left but people these days look for relatively quieter and less hectic lifestyle for a better work-life balance. This coupled with an all-round development of tier 2 cities, pleasant and rejuvenating weather, good law and order, employability, affordability and natural beauty has attracted professionals, students, businessmen and even the senior citizens alike, in hoards.
Further, the decongestion plans embarked upon by the government to move major markets out of Mumbai and some large industries shutting down has had a sobering effect on land and real estate availability, which in turn have driven investors away.
Can you discuss the potential and opportunities for real estate firms in the other major cities?
The growth story and development is no longer captive to a certain region, state or political situation. Due to the wonderful role played by the media in educating and informing people even in remote regions, they demand, and the governments have to work hard to fulfill the same. This has meant that opportunities are being created all over the country and the gaps are gradually disappearing.
Further, transparency has also helped the demand and supply forces to get a fair play and allow faster development in areas where there is large scope for it. We may still be far from the ideal situation of everyone getting equal opportunities but considering the size of our country and hundreds of considerations deciding the fate of people, I am happy to note that we are approaching the desirable stability much faster than many of the developed countries.
Most of your projects are in and around Pune. Have you planned any geographical expansion in coming years?
Pune is a star among the emerging megapolis and offers unlimited opportunities for investors in real estate properties. The city is blessed with wonderful and almost unparalleled topography due to several valleys ensconced within mountain ranges which allow infinite opportunities for creativity in land development. Hence, we would first like to exploit this region as much as possible. However, we do have plans to pan out elsewhere in Maharashtra and beyond. Aurangabad, Satara, Solapur and even Konkan region are full of natural beauty and natural resources and we are seriously looking at them as our next destination.
Property developers offer attractive pre-launch incentives to accelerate sales. What is your outlook on real estate prices?
Any new project needs to be taken to the prospective customers/investors through some means, be it onsite function, a celebrity show, a pre-launch offer or the advertising. Once people know about your project and the product is good and competitive, it is the word of mouth that works hardest in favour of the developer. One then just needs to keep a nominal presence in the media. Each developer and builder along with their media team decides what is likely to work best for them depending upon the region, the clientele and the past pointers.
What impact would the housing sector face due to rising interest rates?
The fluctuations in interest rates is a reality that the investors and buyers have learnt to live with. They are aware that higher (or lower) interest rates are not here to stay forever. The government sops for people buying homes with loans have also drawn more people to invest in real estate. There are many other parameters which figure much higher on the check list than the interest rates and hence a 25 or 50 basis points increase in the interest rates is not going to make appreciable dent on the demand/price.
What are your suggestions for new investors who are looking to park money in real estate?
First and foremost, I would like the buyer/investor of the property to write down, and I mean write down, the purpose of his action. Dealing with these customers day in and day out, we can say that about 70 per cent of the customers get stumped when we ask the first and most basic question on the motive of their purchase. Many do it because their friends or relatives have suggested it but very few have their own study of the subject.
Choice of location should be the next on agenda, asking questions like the current status of the area, scope of development, distance from your current place of stay, local amenities etc. The choice of developer also plays a very important role. Reputed and old hands in the industry should be favoured over the newcomers even if it means paying a buck more but one is assured of a clean and professional deal.
Real estate stocks have been battered in recent times. At his juncture, do you think investors should take the risk?
Real estate is one of the indicator industries which get affected, positively or negatively, whenever good or bad news is expected, irrespective of whether the news is in anyway related to the fortunes of the industry. It is a risk for those who just want to ride the wave without much study of the industry but for discerning investors, this could be an opportunity to enter at lower levels.
Another thing I would like the readers to note here is that gone are the days when an entire industry could be lumped together and strategies made. Segmenting an industry, especially that of construction and real estate business, is a must. We have had times when the upmarket business was doing ordinary business whereas the economy segment was booming. A year down the road the picture could be completely opposite.
The cutback on loans to property developers has made builders apprehensive.Availability of funds for construction and real estate is its lifeline.
These days projects invariably last for two-three years, if not more, and availability of money in this period could go through multiple cycles. It is not the paucity of funds per se but the delays and the cascading effect that it causes, more psychological than real, that shatters the builder’s plans.