The Indian real estate market has witnessed an overall slowdown following the Covid-19 pandemic. But realty players continue to come up with new projects, expecting a demand recovery soon. Ketan Sengupta, CEO, Bengal Peerless Housing Development Company(BPHDC), JV with the West Bengal government-controlled West Bengal Housing Board(WBHB), speaks to Indronil Roychowdhury about the logic behind new projects and the financing opportunities that the real estate projects have at the present. Edited excerpts:
How is the property market at present? Where do you expect it to go in the next five years?
The demands low down in the residential segment has already curtailed housing sales, project launches and price growth due to the pandemic. The Indian real estate market will definitely improve after a year or two, once the pandemic settles. The sector has a multiplier effect on other allied industries in terms of employment generation & GDP growth. The demand for residential real estate for both Kolkata and suburbs could show signs of pickup in six to 12 months once the pandemic settles. With unlocking of various activities, this industry will take about a year to get back on its feet. The real estate sector has to understand irreversible changes in consumer values, habits, consumption patterns, social behaviours and preferences.
There are a lot of properties lying vacant in the country. What is the rationale behind coming up with new projects?
Problem of housing for common people is as acute as the other problems the country has been facing since Independence. The importance of proper settlement of people of different sections of society has been fully acknowledged by the Government of India in its National Housing Policy declared in May 1992.The Government of West Bengal, in an effort to combat the problem of housing, formed joint sector companies with West Bengal Housing Board and private entrepreneurs.
How will real estate be placed as an asset class in the next five years? What percentage of the Indian real estate projects are being sold to the NRIs? Has it given any boost to the rental market?
By 2040, real estate market will grow to Rs 65,000 crore ($9.30 billion)from Rs 12,000 crore ($ 1.72 billion) in 2019. Real estate sector in India is expected to reach a market size of $1 trillion by 2030 from $120 billion in 2017 and contribute 13%tothecountry’s GDP by 2025.
The sector will incur more non-resident Indian (NRI)investment in future, both in the short-term and the long-term. Bengaluru is the most favoured property investment destination for NRIs, followed by Ahmedabad, Mumbai, Pune, Chennai, Goa, Delhi and Dehradun. The migration of people in pursuit of better education and career opportunities to Indian cities from rural and semi-urban areashasalmostdoubledinthelast10years.This has directly pushed up the demand for rental housing, though realty players are not yet poised to develop properties exclusively for rentals since returns are not yet up to the mark.
What is your take on the present state of housing finance? How much has been the inflow of foreign funds into the Indian real estate market?
The government has created an Alternative Investment Fund in order to revive stalled housing projects and Affordable Housing Fund in the National Housing Bank and using priority sector lending shortfall of banks/financial institutions for micro-financing of the HFCs. This is a very welcome move to encourage development of this sector. FDI into India rose 13% to a record $49.97 billion in FY20 from $44.36 billion a year earlier. FDI investments have helped the real estate companies complete projects amid the ongoing liquidity crisis, aggravated by Covid-19. Construction has become the fourth-largest sector in terms of FDI inflows. Besides, Sebi has given its approval for the Real Estate Investment Trust(REIT)platform, which will allow all kinds of investors to invest in the Indian market. It would create an opportunity worth `1.25 trillion($19.65 billion).
How much of the cumulative investment has the real estate sector got in the last five years?
Indian real estate market attracted over $6.06 billion in 2019, of which $5.0 billion was Private Equity inflow.
What are the projects with which BPHDC is working?
We have some existing land banks with West Bengal Housing Board, which we plan to develop in the near future. We have a current residential project at Suri in the state and we are ready to expand subject to availability of land under WBHB. Since BPHDC is a joint venture company with WBHB and The Peerless General Finance and Investment Company, with both having 49.5 % equity participation, we are required to follow the WBHB norms requiring 50% reserve for the LIG, MIG segments and the remaining for the HIG segment.
We are developing Avidipta-2 at EM Bye Pass Kolkata with commitment to green initiatives, lower energy consumptions, with designs maximising sunlight and cross-ventilation. Bengal Peerless has adopted the simple yet highly effective reduce, reuse and recycle policy with a strict adherence to all norms with regards to environment.
