I don’t have the figures ready with me but I know Unitech Ltd has hundred acres of slums and Lehman Brothers has taken equity in the project. There are 50 such projects across Mumbai. It may take five years for all these projects to complete but the work has started and contracts have been given to different developers.
I only hope that the implementation of these projects is well done. First, the developers build the housing for slum-dewellers, move the people there and then exploit the space. Two key things in slum development are governance and transparency. I am hopeful…
The land prices have gone very high and the only way to get cheap land is to do rehabilitate a slum and you can really move fast if there is political support. If a developer gets cheap land, it can make significantly higher profits but it helps the city, it helps the poor people…
Some realty stocks have seen huge correction. Do you see them going down further?
Yes, their prices have come down significantly. Look at some of the companies that are listed at AIM (alternative investment market) in London. Unitech is quoting there at 50% of its issue price, Hiranandani (Construction Pvt Ltd) at about 52% of its issue price and Raheja (Ishaan Real Estate Plc of K. Raheja group) is quoting at 80% of its issue price. All of them have lost money and transactions are few and far between. Five or six real estate firms got listed at AIM but the party is over. They all went there to raise money to buy land as it was not available here.
Banks are going slow in disbursing home loans. Isn’t that an opportunity for HDFC?
The slowdown is not good for the country and for HDFC. We have always grown at about 30% and our first quarter growth has been good but we do see a little bit of slowdown in August to around 24%. We will have to wait as August has traditionally been a difficult month because of monsoon.
There is a great opportunity for an asset reconstruction fund in real estate sector today. Some projects will get stuck and they need to be bailed out. Developers who have bought land need to make payments in phases and if they cannot do so, they will face litigation.
It’s a great opportunity for rehabilitation and asset reconstruction funds or venture capital funds and take advantage of the situation.
What about HDFC’s property funds?
We have two property funds – one is a $800 million foreign fund and another Rs4000 crore domestic retail fund which is managed by our asset management company. We have not invested more than 5-10% of that.
What about the foreign fund?
We have invested about $150 million of the foreign fund. We have taken a stake a very large project of Shapoorji Pallonji (and Company Ltd), spread over cities.
Aren’t you slow in your investments?
Yes. But we are not getting attractive deals. The pain is there but it’s not unbearable. When it becomes unbearable, prices will be more realistic. Today, every developer hopes that things will pick up. When I ask builders why aren’t they getting rid of their stocks, they say they don’t want to bring down the prices when the market is slow. I think they will give some incentives during the festivals – Dussehra and Diwali. For the time being, they are holding on…
Is it a bad time for HDFC?