With feel-good factor returning, buyer confidence has picked up in realty

Written by Mona Mehta | Updated: Nov 8 2009, 04:20am hrs
Mahindra Lifespace Developers Ltd (MLDL), formed as a result of a merger between the realty arms of Mahindra and GE Shipping in 2001, has outlined a vision to develop area of 4 million sq ft in the residential real estate space to be launched in the near-to-medium term in Mumbai, NCR, Chennai, and Nagpur. Anita Arjundas, managing director & chief executive officer, Mahindra Lifespace Developers Ltd spoke to FEs Mona Mehta on how Mahindra Lifespace may end up with more than 50 million sq ft of office space supply this year and will focus on Mahindra World City projects in Chennai and Jaipur which will be followed by other cities later

What are your key real estate projects in the commercial, residential and retail segment

MLDL has till date completed approximately 6 million sq ft of real estate development, in the residential (spanning 5 million sq ft) and commercial (1 million sq ft) sectors. These have been in Mumbai, Delhi, Gurgaon, Chennai and Pune.

We can also take credit for being the pioneers of SEZ development in the country, with our Mahindra World City Chennai, the first, and as yet, only successful private sector integrated business city including SEZs in the country, spread over 1,550 acres.

Our ongoing projects in the residential segment of 3.5 million sq ft are located in Mumbai, Pune, NCR and Chennai.

Through our Mahindra World City brand of integrated large-scale development, we are currently developing the 3,000 acre Mahindra World City in Jaipur. This is a large-format project, comprising industrial land, ready built IT space, residential and commercial developments. The Grade A IT-office space, called Evolve, involves a development of around 1.5 million sq ft of which the first 2 lakh sq ft is already developed and allotted to Deutsche Bank. Our customers at the World Cities include marquee names like BMW, B Braun, Deutsche Bank, Cap Gemini, ICICI Bank, Infosys, QH Talbros, Timken, TVS Group and Wipro among others.

What is your take on the revival gaining ground in the Indian real estate market

India as a market with unlimited opportunities is a fact that does not need validation. Home ownership is one of the basic aspirations for us. Moreover, it is a high-value and high-involvement purchase, and therefore, extremely sensitive to the level of feel-good among the consumers. The last year, with the feel-good factor completely disappearing from the general mindscape, real estate did suffer, with prospective buyers putting on hold the purchase decision. With the feel-good in the economy returning, combined with the price rationalisations by developers, and reduction in mortgage rates, market conditions have significantly improved in the last four to six months.

Buyer confidence is returning, as witnessed not just in real estate, but also in most other sectors. Affordability levels (EMIs as a % of net monthly income) now is very close to the levels seen in 2002-03, when the pick-up first began. Price corrections too have stabilised, and we are seeing robust sales at these price points. Another positive outlook is that the investor/speculative element has reduced drastically and the buyer is mostly the end-user. This is a positive recovery, but would require all stakeholders to work in sync, to ensure that we do not see a relapse.

What are your real estate expansion plans in India

In the residential real estate space, we are currently planning to develop approximately 4 million sq ft area to be launched in the near/medium term in markets of Mumbai, NCR, Chennai, and Nagpur. Besides this, we continue to look at new markets and opportunities in existing markets to expand our footprint and customer base.

How many affordable housing projects is Mahindra Lifespace Developers planning to launch

The affordable housing segment is definitely an interesting proposition. As per industry estimates, this segment has a potential market size of $66 billion by 2011 and is expected to see a requirement of at least two million units by that time. Although supply is lagging behind demand. It is estimated to be around 4,27,000 units in 2009, projected to rise to 670,000 houses in 2012.

We propose to launch an 0.80 mn sq ft value-home product in Chennai shortly, which we feel will be a different product as against the conventional approach of either drastically reduced unit sizes or developments at locations that lack on physical infrastructure and connectivity.

What are your views on the price correction in the Indian real estate market

I think the prices have stabilised and hence, do not see much room for further corrections, except in few specific micro-markets or projects. Balance sheets of most developers are now in much better shape than they were a few months back. Affordability among buyers is back at pre-boom time level. We are seeing robust sales at current price levels. Given all this, I do not think another round of cuts could happen.

However, the commercial and office space segment is under pressure at present. In the last two-three years, rampant, speculative development has caused a huge supply glut. Conservatively estimated, we may end up with more than 50 million sq ft of office space supply this year, while the absorption is likely to be less than half.