Dheeraj Dogra, Former National Director – BNP Paribas Real Estate
Having achieved many goals in his career in Retail/Real estate, Sales, Marketing, Business Development, Key Account Management, Brand Management, Dheeraj Dogra is looking at expanding his horizons . As part of his current assignment he is into helping retail/mixed use projects on exclusive mandates for providing end to end solutions.
An Indian American,with over 18 years of international experience, Dheeraj is a Global Retail & Realty Analyst. He has gained expertise in managing entire operations with key focus on bottom line profitability by ensuring optimal utilisation of resources.I am considered a turnaround expert, known for taking up difficult projects and turning them around. He is a Member of the CII (Confederation of Indian Industry) Subcommittee for marketing and retail for Eastern India & a faculty with REDCOH (Real Estate Development council of State of Haryana). He is also the visiting faculty of many management colleges including ISB Hyderabad, icfai,Delhi Univ,IIM Kozikode,Asian School of Management,Great Lakes,Amity University,Bimtech, IMT amongst others and a guest speaker at many industry related forums across the globe.
In an interview with team ABT, Dheeraj shares some insights into the Real Estate Industry in India
Q: Tell us about briefly about your journey & experience in the Real Estate Sector
My initial exposure to real estate was in the United States, was around retail real estate involving opening of new stores The residential real estate market in the US works very differently than the Indian market and the transparency levels there are way higher. Over the course of last several years since I have been in India I have seen several positive changes in the way the real estate sector is functioning in India. How ever there is still a long way to go before it matures. Here are few of my observations.
Since the systems of urban planning practiced in India have not been in sync with the processes of economic growth, they will need to be revitalized to address the challenges of structural transformation of the economy with rising share of non-agricultural sectors in GDP, relocation of people and resources from rural to urban areas, and the associated increase in urbanization. Despite the ever rising construction activity in India, awareness of sustainability in India has significantly lagged behind those in the West. But with growing importance of environmentalism in India, the Indian commercial sector has begun to make conscious efforts towards creating sustainable real estate.
There weren’t many real estate professionals in India since there were no specialized courses in real estate. The absence of a nation wide regulatory body to control the practice of real estate added to the misery of the buyers and sellers. They were left to the mercy of homegrown real estate agents who at times lacked even primary education. All this is slowly changing. Several educational institutions now offer specific courses and even degrees in real estate, this is contributing towards the knowledge, practice & value that they bring into the industry.
Prior to the internet era, comparing and zeroing on the right property was an extremely tiresome process.Buyers today, are more comfortable finalizing a property after thorough online research and not just word of mouth. Ratings and reviews, price points and trends — the internet has brought things closer. With the current real estate regulation act 2016 coming into force, I see a lot of irregularities coming to an end.
Q: What are your thoughts on the changing landscape in the Indian real estate market right now?
Over the past decade, emergence of new residential markets on the outskirts of big cities has been one of the most significant changes in the domestic real estate sector. Evolution of new real estate concepts like green buildings, affordable housing, smart cities, retirement homes for seniors, Real estate investment trusts (REITS), technology driven construction are some of the concepts which would act as change agents in the Indian Real Estate scenario.
Developers are also going “green” to improve energy efficiency, and trim operational costs. “Green buildings” leverage upon natural lighting and ventilation and use environment-friendly raw materials such as fly-ash bricks, energy saving electrical fittings and water-efficient plumbing fixtures. Apart from this, developers are turning into formal corporate outfits and deploying modern construction technology, in the form of pre-fabricated, pre-cast and monolithic structures. This would save both time and money.
Smart cities are the newest kid on the block. Area- based development will transform existing areas (retrofit and redevelop), including slums, into better planned ones, thereby improving livability of the whole City. Comprehensive development in this way will improve quality of life, create employment and enhance incomes for all, especially the poor and the disadvantaged, leading to inclusive Cities.
Another concept to have gained ground is senior living. Growing nuclearisation of families and the economic independence of retirees have given rise to properties aimed at the aged. These properties offer facilities such as common kitchens, housekeeping and healthcare services. This space has generated considerable interest from global healthcare solution providers as well, who have forged agreements with some local developers.
Q: What are some of the challenges that you feel are unaddressed in Indian Real Estate both from customer & business point of view?
It won’t be fair if I was was to pinpoint a finger solely at the real estate sector. The business environment in India needs to be entirely overhauled in terms of clarity of purpose with focus on deliverables and enhanced transparency levels. In a simple user-driven market, demand and supply will determine prices. In a market dominated by investors, cost of funds and supply of property will determine prices. The most important problem in the real estate market in India is that it is dominated by investors who access money that lies outside the system. This is why we have the ironical situation of a large number of unoccupied houses on the one hand and a housing problem for the common household on the other. The pricing of real estate is not determined keeping in mind the target customers household income. India’s median middle class household income is around Rs. 40,000, (approx US$750), the disposable income post the taxes would be close to only about Rs. 30,000 (approx US$500) . The average mortgage interest rate in India is 10.5%. With that kind of income a customer can barely afford even an apartment for Rs. 15 lakhs (approx U$23,000). For that kind of money its almost next to impossible to find an apartment in any metro city of India. Hence if the developers are sitting on excessive unsold inventory, its simply because the pricing never matched the affordability of the end user. Investor driven buying would sooner or later come to an end.
None of the Indian developers, have been able to deliver a project within the stipulated time and specifications that have been promised in the Buyers agreement. The buyer’s agreement are mostly lop sided favoring the developer. On top of that Indian realty companies are not customer friendly. They need to learn how CRM is practiced in other good realty firms across the globe. The Indian consumer is totally at a receiving end when it comes to post sales service.
How do you see the Government’s role in providing affordable housing becoming a reality?
Let us first understand what is Affordable housing. It is a term we use for residential units in India’s urban areas which are affordably priced with respect to households that fall within a specific limited income range. There is no single set of parameters to define what an affordable housing unit should cost in India. This is because the pricing and feasibility to developers of affordable housing is a function of the city, location within the city, type of project being built and also the construction technology employed. The American definition for Affordable housing is any housing for which total costs (rent or mortgage plus utilities) are no more than 30% of a household’s annual income. All families, including those with low incomes, should be able to find well maintained housing that meets their budget.
The budget announcement on allowing 100 per cent deduction for profits to housing projects building homes up to 30 sq metres in the four metro cities and 60 sq metres in other cities is likely to spur supply of affordable homes, demand for which makes for almost 90 per cent of the demand for homes in India. Builders and real estate experts say the exemption for affordable housing projects would bring in a 15-20 per cent upside on profits after paying the MAT tax for a real estate developer building such a project, making it easier for the developer to attract foreign and domestic investment for housing projects.
The enhanced home loan interest deduction will further encourage buyers to invest more in this segment. First time home buyers will get deduction for additional interest of Rs 50,000 (US$ 800) per . annum for loans up to Rs 35 lakh (US$ 54,000) sanctioned in 2016-17, where house cost does not exceed Rs 50 lakh (US$80,000). This will push developers to redeploy money into building more affordable housing.
What according to you, could be the impact to the the Govt’s move to remove restrictions on FDI in Real Estate?
India’s real estate sector is in the midst of a slowdown. As buyers’ interest in real estate remains muted, developers are finding it extremely difficult to sell their projects and raise money for construction. The government’s measures, to ease the flow of FDI into the sector, will help cash-starved developers. According to experts, the removal of the restriction on minimum size and minimum capitalization will enable FDI to come into smaller-sized projects, including tier-II and tier-III cities. As commercial projects tend to be bigger, this measure will especially help the residential sector, where the slowdown is more pronounced. Affordable housing projects could also benefit. With relaxation in minimum capitalization area and exit norms its more than likely that more foreign capital will enter India’s realty sector, particularly residential projects
Do you see any opportunity for Indian Realty to adopt or learn from other countries? Please tell us more.
As far as specific learnings for the Indian developers from the foreign counterparts is concerned, I strongly suggest they need to get their home work done before they announce any new projects. They need to understand their target customers inside out. Complete market research studies in terms of what a customer is looking for, within the price they can afford should form an integral part of the study. All the excess inventory we have been left with for example in Delhi NCR is a direct result of not having a grip on the target customer.
Indian realty majors need to be technologically at par with their foreign counterparts. For example precast is almost a norm in developed nations. The main advantages of precast technology are quality, speed of construction, and a value-for-money product. In order to be competitive the Indian real estate sector must become more transparent and demonstrate the potential for developing international standard properties and infrastructure, whilst at the same time cater to the unique requirements of an Indian population polarized at the two ends of the economic spectrum.