Brotin Banerjee | Brickless, green buildings are in demand5 min read . Updated: 24 Feb 2012, 11:07 PM IST
Brotin Banerjee | Brickless, green buildings are in demand
New Delhi: Salt and coffee to cement. In a career spanning 13 years across key Tata group companies, Brotin Banerjee, managing director (MD) and chief executive officer (CEO) of Tata Housing Development Co. Ltd, has acquired a rare acumen about the commodities business and how consumers relate to it.
In an interview, Banerjee spoke about the challenges in the housing construction business and the latest trends in the industry. Edited excerpts:
What are the latest trends in construction? How have they impacted the use of commodities such as copper, steel, cement and aluminium? Do you see the ratio of the use of these commodities changing?
In the recent past, there have been increasing demands for structures that are sustainable, and meet safety, security and environmental considerations.
Currently, developers are adopting modern trends like brickless technology and sustainable green building.
The use of brickless technology reduces construction time and costs, and makes the projects viable both for the buyer and developer. This technology ensures hassle-free construction and replaces commodities like timber, steel, wood, aluminium, etc. with specially designed plastic spacers and composite cement boards, and results in rapid construction and more carpet area.
Prices of the commodities mentioned above have been volatile and high. How has this impacted your business? How you do hedge yourself against the price swings? How is the current year expected to be for commodity prices?
It has been difficult to predict commodity prices. We try to fix it as much as possible on a long term-basis depending on the projects. We bank on our suppliers, with whom we have contracts, and economies of scale.
How much faster can modern buildings be built?
There is no formula. It depends on the height of the building and the size of the workforce. But typically a conventional building could take three years for completion, while we could take about one-and-a-half to two years.
How much more expensive are the buildings that are built with the new technologies?
They would be 8-10% more expensive compared with conventional technology. But future savings could be higher.
At what rate are you seeing demand for new homes growing?
The demand growth for housing that we are likely to see in 2011-12 will be at 35-40%. We expect to grow at the rate of about 70-75%. This is quite a good growth, but we would have liked to grow a lot more. In 2009-10, we saw a growth of over 100%.
How many projects do you have at hand for the next fiscal year, 2012-13?
We have 8-10 projects next year mostly in the metros and in the tier I market such as Pune. This would mean approximately 5,000 homes. In the current year (2011-12), we are working on six-seven projects with approximately 4,200 homes. As much as 85% of our construction is in the housing segment.
Most of the reality sector is not transparent. Do you believe your industry has to think about major ethical issues?
Most of the people are aware realty is an unorganized sector. It is perceived as a highly non-transparent sector primarily because of factors such as low entry barriers, unclear regulatory framework, etc. Anyone can become a developer and construct property the way they want after getting the necessary approvals.
But now the time is changing with entry of corporates into the real estate business who have good corporate governance and care for consumer perception, which we believe will eventually be an industry practice and the industry will be seen as more ethical and transparent.
How will the new land acquisition Bill affect your business?
The new land acquisition Bill will have minimum impact on our business as we mostly work on a joint development/venture model, where we do not have to acquire the land on our own. We hope that the new land acquisition Bill will be able to regulate the land prices.
Looking ahead, what is the biggest worry for your industry’s growth?
Reduced demand due to high equated monthly instalments, resulting from significantly higher interest rates, have reduced the affordability of homes.
Delay in getting approvals for the projects escalates cost and adds to the delay in the projects.
Additionally, the increased construction costs - both material and labour - have compressed margins and this is likely to continue into 2012.
How badly has the slowdown in India’s economic growth hurt the housing construction sector?
While India’s economic growth has definitely slowed, its growth rate is still considered moderate, especially in comparison with the volatile economic landscape currently prevalent across the globe.
With regards to the upcoming year, we would anticipate that the housing construction sector continues to grow, albeit at a slightly lower pace, as the demand for housing still appears to exceed supply, and the weakening rupee makes India an attractive real estate investment destination for non-resident Indians.
India’s large inland market is one of its biggest economic assets, accounting for the largest share of the demand pie. For instance, the country has an unmet housing shortage of approximately 26 million units, which alone offers a huge growth potential for the realty sector in India.
Additionally, a growing middle class and increasing incomes across the board have seen an increasing appetite for low-cost and affordable housing, even in a downturn.
The trend over the next couple of years projects a continuation of the smaller home style, but as price appreciation returns and tax policy remains unchanged, house size will likely grow again as consumers find value in larger spaces.
Real estate has a low volatility quotient, and also low correlations with stock markets and debt. So investors with a long-term view should continue to include property in their investment portfolios.
On what formula do you base the prices of new homes? In the current year, how are housing prices looking?
Generally, the prices of new homes are based on factors such as location of the property, how many acres of land it covers, type of housing (low-cost or premium properties), the number and type of amenities the new homes will be equipped with, the sq. ft of the apartment, government regulations and laws.