Jaithirth Rao, popularly known as Jerry Rao, is running on a new track after donning different hats in his career ? spending two decades with Citibank, a decade building IT company MphasiS before selling it to French firm Electronic Data Systems (EDS) in 2006, and now, building affordable homes. His Bangalore-based real estate company Value & Budget Housing Corporation (VBHC) builds homes within R12 lakh. He has plans to build one million homes in the next decade and wants VBHC to be looked at as a ?manufacturer? of affordable homes rather than a real estate developer. Rao speaks to Shubhra Tandon and Baiju Kalesh, tracing his journey from banking to realty, explaining the challenges and opportunities in his current business. Edited excerpts:

How did the idea of building affordable homes come to you?

I wanted to do something big. I wanted a preferably bottom-of-the-pyramid, scalable business. So I looked at healthcare, I looked at education, but somehow they did not excite me and then I thought of budget housing. And to me, this seemed the place where there were not many players who could make a disruptive kind of impact. So that was really the reason. I worked with Monitor, a consulting company, and we generated some scenarios and options. And it seemed to me that there is a fairly large demand in the peripheral urban India (population that resides on the outskirts), where the income-to-house price ratio is completely distorted.

Citibank, MphasiS then realty ? why such major shifts?

At Citibank, I was posted in California looking after the technology division, so I got interested in it. It was in 1995, when two important things happened. First, Netscape launched a free browser and changed our world, and second, it was the year when more PCs were sold in America than television sets. It was a year of transition, PCs were no longer office equipment, they became consumer goods. I started the internet movement at Citibank. In 1998, I quit Citibank and decided to move because I was not getting promoted. Since I was running the technology division, I decided to set up a technology firm.

Originally, I was going to take investment from Citibank Venture Capital because they were insistent, but then we could not agree on the terms and Baring invested in us. A couple of Citibankers joined me in the firm, which we started as an internet-IT firm. The BPO started later in 1999-2000. We started internet and web work for legacy companies. Our biggest customers were JP Morgan Chase, Citibank and legacy companies primarily in the financial area. At that time, web work was quite new, 3D architecture was new and that was what we were working on.

Then in 2000, an offer to merge BFL Software and MphasiS came and I was offered to become the CEO. However, in 2006 itself, we started seeing that our growth rates were lower than that of Infosys or TCS. We tried a lot of things but it did not work. EDS became interested at that time as they wanted to bulk up their India business. EDS wanted me to stay as non-executive chairman, so I stayed. But when HP took over EDS, I had no reason to stay on.

But, isn?t realty a completely different proposition?

I didn?t want to retire and wanted to start another business ? not in IT and not some goody consultant business. Various IT companies and banks made offers, but I was not interested as I wanted to be in an operating company, and not become an investor.

Did you discuss your affordable housing plan with people?

Various people. I went to Deepak Parekh (chairman, HDFC), and he said it is a great idea, but we need professional and clean people in the industry, especially if the intention is to target affordable, budget segment. He said we need to do a lot more and get back with a proper business plan. For the next six-to-eight months I was in Harvard Business School as entrepreneur-in-residence in 2008. I spoke to various professors there and got a lot of ideas. That?s when I started writing our original business plan. Monitor helped me too.

Was HDFC the first investor in the company?

Yes, HDFC was the first investor. They have 10% equity. It was in October 2009.

Who owns the rest?

Carlyle private equity owns 25%, Caspian Advisors owns 8%, I and Jayakumar, who is managing director at VBHC and my former Citibank colleague, together own 33% and various other investors own 24%. The others are all seed investors and they came in the second round. The first round was me and Jayakumar. Carlyle came in six months back and invested $26 million.

How much did you invest in the first project and when did you sell the first unit?

VBHC launched its maiden project ?Vaibhava? in 2010 in Bangalore. The investment in the first project was R180 crore. At the SPV level, we had taken some equity for the purchase of the land. In August 2010, we sold the first apartment for R5 lakh at sub R1,500 a square feet for an unit sized 350-400 square feet.

What are your future plans?

There is some value to our going public soon, since I think consumers may feel far more comfortable in buying from a large listed company than a small developer. On the other side, we should not hurry and should scale up and assure investors that we are a manufacturing company. To my mind, that is most important. If they keep looking at us as any other real estate company and keep valuing our land bank, I don?t want to be in that business. They must say, Honda builds cars at R15 lakh, these people make houses at R12 lakh.

The company now plans to tap other markets beginning with Chennai, Mumbai, Hyderabad and the NCR region.

What are the challenges you see going ahead?

The single biggest challenge today is the approval process. Now we have the ministry of environment, which is adding anywhere between 16 and 18 months to the process, and it has become far more whimsical. It?s almost as if we don?t want homes in this segment. Also, there is no standardisation of processes in different states, each state has its own rules.