January 2017

We interviewed Mr. Rakesh Pai, Senior Vice President – Finance & Accounts of Redevelopment vertical of Shapoorji Pallonji Group (S.D. Corporation), to seek his views on the recent developments in the real estate and construction sector.

Below are the excerpts from the interview.

The Shapoorji Pallonji group has a rich tradition of delivering iconic projects for over 150 years. Tell us something about the journey of the group in the real estate and construction sector in general and of your redevelopment vertical - SD Corporation in particular.

Over the last 150 years, Shapoorji Pallonji & Co’s (SP Group) expertise has been repeatedly showcased on projects which involved a major advance in construction technology or whose size was beyond the capacity of most others. Over the years, SP Group has built diverse civil and structural engineering masterpieces like factories, nuclear research establishments, nuclear waste handling, scientific and research establishments, stadia and auditoria, airports, hotels, hospitals, giant skyscrapers, housing complexes, townships, water treatment plants, roads, expressways, power plants and biotech facilities. SD Corporation Pvt Ltd (SDC) - a joint venture between Shapoorji Pallonji Group and the Dilip Thacker Group was incorporated from an opportunity to create a masterpiece out of a slum rehabilitation project. SDC’s landmark Project “The Imperial” is the tallest, government approved and fully occupied residential building in India of 60 storeys each and at 253 meters (827 feet). We have successfully rehabilitated 2,664 slum dwellers in Tardeo, Mumbai. With more opportunities available in the redevelopment space with dual advantage of a profitable business and betterment of society, SDC continues to focus on redeveloping old buildings & residential colonies in Mumbai, thereby improving the living standards of residents, resulting in social upliftment as well.

Of late, the government has introduced several initiatives to infuse liquidity in to the sector. Do you believe the government has done enough or there is more desired here?

The government has played a pivotal role by introducing initiatives for liquidity infusion like relaxation of norms for FEMA, FDI and ECB Borrowings. This will definitely help in easing liquidity crunch of the industry. However, there is more space for reforms in Banking & Financial services sector pertaining to rules for investing/lending to real estate, to build confidence among foreign and domestic investors which shall benefit overall real estate industry. The recent demonetisation reform by the government would definitely benefit the sector in long run and will ensure a cleaner economic environment for businesses.

Also, SEBI has eased the norms for REITs and InvITs. Many believe this will open the doors for the foreign funds in to the Indian market. How realistic is this optimism and is anything actually moving on the ground?

The relaxation of norms for REITs & InvITs by SEBI is a welcome move. After few encouraging examples, the industry will definitely embrace it. These financial products have been a huge success in foreign countries and we see a good potential in India as well. With initiatives like GST & RERA which should transform real estate into more organised sector, the investment opportunity in REITs & InvITs would become attractive for foreign investors even further.

What are your views on GST? How do you see it impacting the sector? How ready is the sector to embrace this new regulation?

GST, which has been one of the long-awaited tax reforms, has been formally rolled out. Union government of India has set an optimistic deadline of April 2017 for its implementation. Post this, all the businesses shall be under a common umbrella as far as indirect taxation in concerned. However, we are not in position to ascertain the impact of GST on real estate projects due to lack of clarity/ information on

  • Applicable GST rate – yet to be announced
  • Abatement for land value
  • Credit mechanism on opening work in progress is restricted on invoices issued not earlier than twelve months immediately preceding the appointed date

How does your Company expect to benefit from these initiatives?

The initiatives and reforms like RERA, Demonetisation, GST etc. will certainly pave a pathway for bringing transparency in doing business, thereby providing a level playing field, which will immensely benefit players like us.

Where do you see the sector five years from now and your Company in particular?

We would like to believe that subdued demand is improving, albeit slowly, for the real estate sector. With the economy expected to revive on the backdrop of good rainfall, supported by government initiatives, we expect demand to improve steadily. Till now, it has been more of a wait and watch phase for the investors/ buyers waiting for corrections. Future price corrections are turning out to be more of myth now - especially in Mumbai market. The time correction has played its part and is about to end anytime soon. Reforms proposed for the sector, we feel, would discipline the industry in terms of compliances and performance standards. We being a part of industry, expect to benefit from this positive change and shift to higher growth trajectory

Market Speak

We interviewed Mr. Ravi Aggarwal - Co-founder and Group Managing Director, SignatureGlobal Group to seek his views on the recent developments in the real estate sector. Below are the excerpts from his interview...Read more »