The Indian economy may grind to a halt if the replacement of old currency is not swift, says Niranjan Hiranandani, managing director of Hiranandani Communities. He says the demonetization will impact home sales, but only initially. Once there is sufficient circulation of the new currency, sales will post larger numbers, Hiranandani tells ET in an exclusive interaction. edited excerpts:
What are your views on currency demonetization? How will it impact the economy?
The aim is good; the manner of implementation swift and immediate. But the process of replacing the demonetized Rs 500 and Rs 1,000 notes needs to be quick, else we may witness major segments of the economy—if not the entire Indian economy—grind to a halt. That is worrying, and I hope the system will ensure that new notes are made available in sufficient quantity, not just to individuals but also to industry bodies and the entire chain of economic activity. If this replacement does not happen smoothly, we are in for challenged times. If the GDP shrinks as a result of sufficient new notes not being replaced in time, for example, getting back to the previous levels will pose a major challenge.
Residential real estate sales were slowly recovering. Do you see demonetization impacting sales?
Since 2015, the Indian economy and commercial realty have been witnessing growth in offtake, which logically results in enhanced offtake of residential properties. There is a huge demand for homes in India, the slowdown in sales was caused by various factors including creation of a perception among home seekers. The festive season in 2016 has seen the change, from fence-sitters to actual buyers.
The demonetization will obviously result in a slow-down for some days, this will be felt across the entire economy. Once the replaced currency notes are available in sufficient quantity, and the circulation of money returns to various businesses and trades, residential sales will again post larger numbers. The home buyer who was to pay ‘own contribution’ from his bank account and balance from the mortgaged home loan will do just that. It may take a few days for normalcy, if I may use that term in the correct perspective, to return to the Indian economy.
What are your plans on commercial real estate development post the monetization of the Powai office portfolio? Will this be the model for your future commercial projects too?
The existing business plans include integrated real estate townships, including commercial properties. In GIFT City, Ahmedabad, we have constructed a commercial tower. We are also evaluating industrial townships. So, things are partly on the drawing board, partly under construction. Work goes on is the simple response. This is a monetization model which works in the present scenario. If parameters differ, it might not be workable in the future commercial projects. We have to wait and watch.
How is the property market performing? In terms of sales momentum, is the housing property market at an inflection point?
The economic growth story is getting better; policies are being framed that would have a positive impact on the business sector. We have seen across 2015 the growth in real estate uptake. In 2016, it has been getting even better. Economic indices are good, GDP figures are promising and I see real estate sales happening, subject to the aspects of a good product from a reputed developer with a good track record.
Will the Real Estate Regulatory Authority make the property sector transparent and consumer friendly? Or will it just add one more layer of approvals? Will single-window clearances help in bringing costs down?
The Narendra Modi government’s moves on RERA and GST were aimed at bringing in transparency and rationalizing taxation, but this move—the demonetisation of Rs 500 and Rs 1,000 notes—is clearly one that will fight black money, corruption and terrorism. Cash transactions will be a thing of the past, and I foresee real estate developers moving into institutional financing options in a very smooth manner. It will not just ensure more credibility for the industry, but also, in effect, make the Indian real estate more attractive to global investors. To answer the second part of your question, yes, single-window clearances help in bringing costs down. But it is just one of the various options which should result in making property prices affordable.
What is Hiranandani Group’s growth plan for commercial property developments? How would your revenue mix change hereafter in terms of contribution from the residential and commercial segments?
Commercial real estate is the segment that led the revival in 2015. It created the platform from which residential sales started growing and, at Hiranandani, we are focused on commercial real estate—you would recall the TCS deal at Hiranandani Estate, Thane. We are exploring more such deals for the IT and ITeS sectors. We are focused on commercial realty and I expect the mix to be 25:75 for commercial:residential.
Credits ET Realty