‘Affordable housing for all. That is the war that we have to win’

‘Affordable housing for all. That is the war that we have to win’
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First Published: Fri, Jan 11 2008. 12 44 AM IST

Future perfect: Hiranandani says low-cost housing will happen in the next few years and public-private partnerships will be key to bringing about the revolution by creating the required infrastructure
Future perfect: Hiranandani says low-cost housing will happen in the next few years and public-private partnerships will be key to bringing about the revolution by creating the required infrastructure
Updated: Fri, Jan 11 2008. 12 44 AM IST
Mumbai: The next two years will see a housing revolution in Indian states that have invested in infrastructure, predicts Niranjan Hiranandani, chairman, Hiranandani Developers Ltd, one of Mumbai’s largest realty companies. As land becomes a valuable investment tool and values rise, cities will have to find ways to provide affordable housing—the biggest challenge facing the country, say developers. Hirandani spoke to Mint about his group’s plans. Edited excerpts
The new year has begun on a good note with the Securities and Exchange Board of India (Sebi) announcing the draft guidelines for real estate investment trusts (Reits) and Maharashtra scrapping the Urban Land Ceiling Act (in November).
Yes, it has been a great start to the year. By themselves, the introduction of Reits or scrapping of the Urban Land Ceiling Act do not mean anything, but these are parts of the whole and the big picture for Indian real estate is beginning to look good. But this does not mean that we have nothing more to do—there are still many more issues that need to be addressed. There are bottlenecks in terms of supply of construction raw materials and manpower. The National Housing and Habitat Policy (tabled in Parliament on 7 December), says that the goal is affordable housing for all. That is the war that we have to win—of which urban land ceiling, financing issues and townships are all the different battles that have to be won in order to win this war.
Future perfect: Hiranandani says low-cost housing will happen in the next few years and public-private partnerships will be key to bringing about the revolution by creating the required infrastructure. (Photo: Abhijit Bhatlekar/ Mint)
Earlier, we didn't have enough material available for a Reit. Not getting tenants to vacate, non-confidence of investors, the Rent Act were all issues earlier. But now, Union and state governments are all changing those laws. Today, we are talking about billions of dollars, we have rental space in IT parks, malls, commercial buildings—all these can be spun off into a Reit and move off your balance sheet. That’s how you bring about increasing liquidity to institutions and developers. Ultimately, it means that the funding that is required for creating affordable housing for 24 million people can be found. The Reit, the IPOs (initial public offerings), AIM (the Alternative Investment Market of the London Stock Exchange) and various forms of debt and equity are necessary if you want to take care of the housing needs of the whole country.
Do you see the Rent Control Act being abolished this year?
Not abolished—it cannot be abolished. You can change it prospectively. Let’s say that a flat gets vacated but I can’t let it out again on market prices as the building is covered by the Rent Act. All the old ones we can protect for a certain number of years but not beyond that. But remember, it is unjust to abolish the Rent Act if there is no alternative affordable housing supply. So until an affordable housing supply comes into the market, the Rent Act cannot go.
Do you see the slums getting cleared now that the Urban Land Ceiling Act has been scrapped?
I can tell you that they are not going to grow. You are going to see more constructions by private developers and government agencies such as Cidco (City and Industrial Development Corporation), MHADA (Maharashtra Housing and Area Development Authority) and MMRDA (Mumbai Metropolitan Region Development Authority) in joint ventures and alone. There is the temptation to go into the vacuum in middle class housing where there is a price advantage, but once you get down to the volumes game, you will have to cater to every segment of society, except the BPL (below poverty line) segment where the government will have to give some kind of subsidy.
People have talked about building houses in Mumbai for as little as Rs1-2 lakh. Do you think that is a possibility?
Maybe not in Mumbai city itself, but on the outskirts, yes it is possible. Low-cost housing will happen in the next few years, it will be a big play on public-private partnerships and the government will have to focus on creating infrastructure. The new inflows will not go to slums. They will go to a distant suburb where they can own a house. That’s where you will see the low cost happening. It will happen all over the country, not just Mumbai.
How have prices behaved in the last year? What does it indicate?
Land prices have gone up 100-300% in all the cities—not just in Mumbai. Look at Surat, Baroda, Pune, Coimbatore, Bangalore, Calicut. It means that housing needs are going to go up, values are going to rise for land, investment will rise. People are getting wealthier—they are looking at alternative avenues of investments. Apart from stocks and jewellery, real estate is increasingly becoming an important part of that investment.
Moving on to Hiranandani Developers, you are known primarily as a Mumbai brand. Are you doing anything to change that?
We have already invested in Panvel, Chennai, we are looking at Jaipur, other cities in Maharashtra, we are looking at Hyderabad, Karnataka, we are even looking at North (India). Earlier, the opportunities were limited, the funds were limited. It is not about going to any city just for the heck of it. Our ambition was to be a great company.
Are you looking at listing your company here or on the London Stock Exchange since Hirco (Hiranandani’s investment arm) is already listed on AIM?
Of course, we will. Earlier, we used to think that what we had done would last us a decade. It does not even last a year, so we are constantly looking at funding options. We are open to an IPO, to a further AIM raising, we are looking at a debt raising since the earlier one was an equity raising. But nothing is structured yet. We are looking at doing various things under the Hirco brand.
Would you consider tying up with brands such as Trump Towers that are now looking at India?
No. I think we are a brand by ourselves. We are not averse to associations with various people. The other party has to bring something great to the table—it is not just money, we have other ways of raising that. I don’t think anyone can bring anything to the table other than what we already have. If you see our construction at Dubai, 23 Marina, we are a class apart already. In fact, I would say we are ahead of them in some respects.
You have talked about getting into IT parks and special economic zones (SEZs), what about other areas like hospitality or retail?
We are planning to be in hospitality but we have not frozen on anything yet. We are looking at both building and entering into a management contract with an international hotel chain as well as managing it ourselves. We have not yet arrived at a definite decision.
Where?
Obviously, Mumbai first. Powai, in fact.
Any other new ventures?
We are looking at several new ventures, we are looking at SEZs, larger townships, mixed-use townships in different parts of the country, so we are looking at residential, commercial, hospitals and hospitality. In fact, we were the first integrated township in India.
What is your outlook for the Indian real estate market?
I believe that for the next two years India is on a growth path. We will see a housing revolution unfolding in India. I see that the bottlenecks are being removed. The opportunities are being freed up. Today you don’t have a choice if you want to buy a house—you can’t say, ‘Let me look for a house within my budget in south Mumbai.’ But I am looking at a time when this choice will exist. But that depends entirely on the infrastructure that is being created by the state governments. Today, money is not the issue in building infrastructure—the biggest bottleneck is polity. The state that invests the most in infrastructure will see the housing revolution coming sooner than the ones that lag behind. And it is not only political will but execution as well.
Would you consider entering the infrastructure business?
We will, but not for another year. It will be difficult for us to mobilize the necessary manpower.
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First Published: Fri, Jan 11 2008. 12 44 AM IST