New Delhi: His 80th birthday bash in Udaipur that included a performance by Shakira was fodder for newspapers’ Page 3 supplements. But K.P. Singh, chairman of DLF Ltd, one of India’s foremost real estate companies, claims he was just “a guest at his own party”. In an interview at his New Delhi office that overlooks Jantar Mantar, Singh talks about his autobiography (Whatever the Odds) published by HarperCollins last month and the need for a well-thought out Real Estate (Regulation and Development) Bill. Edited excerpts:
Did you write diaries that formed a prelude to this book?
I was a cadet in the army in 1950. One day, we were supposed to go on a tough run. But it rained heavily. The person in charge didn’t want us to sit idle and asked everybody to write about the last 15 years of productive life. I wrote and, incidentally, came first. Those memoirs remained with my sister for a long time.
Growth catalyst: Singh says home ownership is a very important factor driving GDP. Photo: Ramesh Pathania/Mint
Going back to the book—doctors say it’s a medical phenomenon that as you grow old you lose short term memory but are compensated with tremendous old memory. It happened in my case too. But when you start writing a book, you have to discover yourself, research people, do all kinds of data collection.
You mention your early life, nature, butterflies and fireflies in your book. But you have built a concrete jungle in Gurgaon.
It wasn’t when we started. It was a ravine. There was no cultivation.
The question was can you develop a city? It was an entrepreneurial risk.
Frankly, what was envisaged by me, and when I say me, it means me and Rajiv Gandhi and Arun Singh, was different. They (Gandhi and Singh) wanted a top-of-the-line, very modern city...the way Chandigarh was made. This meant green roads, big spaces. But the governments kept changing and Rajiv Gandhi....the unfortunate tragedy happened. The government went back to its own regulations. So the city (Gurgaon) is based on archaic town planning norms. Now, the Haryana government has substantially changed laws in Manesar which is the new Gurgaon. But old Gurgaon has been made, there’s nothing you can do. But you’ve seen the contribution Gurgaon has made to the state.
However, in phase five, in our area which is still being developed, you see big roads, golf areas...If they had allowed us to do what we did in phase five, everywhere else, it would’ve been the model city of the world.
K.P. Singh of DLF talks about the real estate industry and why he’s not worried about his company’s debt.
Do you still have a dream for a model city ?
I do. I’ve mentioned in the book also. My dream, my legacy—my granddaughters are looking after that. We’ll have 1,000 acres. Eventually we’ll make it the best in the world.
Do you see problems with other master plans in cities across India?
Yes, I do. Kamal Nath has come out with a first class statement I’ve ever seen from the ministry. He said master planning has not been done with the consultation of people. Considering land will become scarce as time goes by, you do not allow low rise buildings. So the idea is intensive use of land. I’m only commenting on what I read. And I agree. The master plan, at the end of the day, must conform to the psyche of the people who are going to use it.
Could you elaborate?
Psyche means you have to understand what a person may do if he’s living in a house. If I’m a doctor, I may have a clinic there. Someone else may have an office. It’s called mixed use. There is no rigidity...you don’t have to go to commercial area for work or a college area to study. For instance, the FAR (floor area ratio) norms are very restrictive. But since there is prosperity, people are building more...and things are going wrong.
How can this be cleaned up?
Radical approach. That’s why I say that the most important sector of the economy today is urbanization. McKinsey did a fantastic report and gave it to the prime minister. It was projected that in the next 15-20 years, cities with a population of more than 1 lakh would double. 80% of government’s revenues will come from urban areas and the GDP growth will be modelled on large scale migration of people coming from villages and seeking jobs. So you need massive urbanization process.
There’s so much backlog that it has resulted in unauthorized development. People will forcibly make one more floor, encroach upon government land and slums will come up. A new look is required. It can be only done when governments at the centre and state levels take a conscious decision.
What are the other challenges?
First challenge is the attitude at the policy making level. First, distinguish profit from profiteering. Two, policies must be enabling to bring developers, not builders, into the game. Builders are contractors. Developers are visionaries. Reform the antiquated laws and don’t duplicate them.
Do you see pressures on developers to bring down the prices, especially, on the under-construction projects?
There’s nothing called ‘bringing down’ the prices. The point is to make it easy to buy homes like all over the world. So mortgage loans are high priority...Here the interest rates are prohibitively expensive.
You’re putting the onus on the government. What about the developers themselves?
First, please understand this is policy driven. The factor of interest cost is important. The property rates aren’t down because the interest is high. Your mortgage rate should not be more than 6-7%. Home ownership is a very important factor to drive GDP, for making a person a responsible citizen.
What’ your view on the new real estate draft Bill that has come in the public domain?
I haven’t seen it fully. But there are a couple of things. I’m an advocate of the regulatory Bill but I say don’t over-regulate. There is a need for a good regulatory body that should be like Trai (telecom regulator) or the insurance regulator (Irda). It’s a very good idea to have a tribunal (Real Estate Appellate Tribunal) as an interface. Apart from the tribunal, there are consumer courts. Do not over-regulate or duplicate the same laws.
They should make the Bill development and consumer friendly and forceful. If someone is making mistakes, there should be punishments.
Compat stayed the penalty of Rs 630 crore on DLF recently. The court has asked to give suggestions for framing a new builder-buyer agreement. Your comments.
The matter is sub judice.
Your net debt has risen.
The interview is not about that but I’ll explain to you. In a manufacturing business, you incur debt to buy machines, build a factory and buy raw material and pay interest on it. The faster a manufacturer turns around his working capital (turns raw material into finished product) the higher is his margin. Any delay in product delivery will turn the environment counter productive for him.
However, in real estate it’s the other way round. You have to see the quality of debt. A developer incurs debt on two things in real estate—when he wants to make a building and rent it out. And when he wants to buy land from the borrowed money. In the first case, the financials of the company will show it as a debt. However, since there is a rental return from the building that he has built, he does not bother about the debt. In the second case, when he buys land, he is actually collecting raw material for the development. Land is the raw material in real estate. It is seen historically, the more you sit on land, the more money you make. Smart people look 10 years ahead and develop a land bank. It is how you view debt in real estate.
But there may be bad debts too. There is a difference between a success story and failure of a developer. Some people must be stuck, I’m sure. But at DLF... our people are smart and we’ve remained ahead of the curve. So the debt doesn’t worry us frankly.
Abhilasha Ojha contributed to this story.