Indian Real Estate – No Progress Without Collaboration

Anil Pharande

The Indian real estate sector has seen a tremendous transformation over the last decade. In earlier years, it was unorganized and real estate developers used to build whatever they wanted, with no planning, quality control and accountability. We can see the evidence of such unorganized development in our cities even today. Moreover, real estate developers were not able to voice their concerns to the government if policy changes or other measures were required. With no cooperation and collaboration between builders, homebuyers suffered the most as they were offered inferior products in areas that did not have proper infrastructure.

The Beginning of Organization

The first major change in this sad situation came in the year 1999, which saw the formation of the Confederation of Real Estate Developers’ Associations of India (CREDAI). The mission of this formal association of real estate developers was – and remains – to advocate necessary policy changes, implement self-regulation among developers, and ensure that all member builders work in a cooperative and well-planned manner.

This self-governing body of builders from across the country has achieved a lot, especially in recent years. It has brought about a lot of positive changes in the industry which encouraged the government to introduce major policy reforms to further improve the industry’s overall transparency and efficiency. The most important policy change was the Real Estate (Regulation and Development) Act, 2016 (RERA).

This major reform was primarily made possible because of the active support of developers members of this association who had become organized and accountable to the government, each other – and most importantly, to their customers. Implementing RERA would have been impossible in previous years.

After RERA was announced, the Indian real estate industry has made tremendous progress and homebuyer confidence is now stronger than ever before. According to industry estimates, organized real estate demand in India was as high as 1.35 bn sq. ft. by 2020 end – and 85% of this demand was for housing.

Nevertheless, bodies like CREDAI are aware that they must remain constantly vigilant and take corrective steps if they are required. Let us try to understand how self-governance, collaboration and collective decision-making work in favour of the market.

Inexperienced Builders & Oversupply

Between 2010-2015, we began to see signs of bad demand-supply management in the Indian housing market. This largely happened because people who had some money but no experience in housing development began launching residential projects.

These unorganized builders included goldsmiths, diamond merchants and cash-rich NRIs from the Gulf who had never built anything before and had no membership in any real estate industry association. They were simply associated with the motto to make a quick buck. More than one million homes were launched in 7 largest cities between 2013 and 2014 – and 14% of these homes were in Pune. This was obviously far too much housing supply.

If there had been enough demand for this supply, India’s housing shortage would have reduced massively in those two years. Instead, there was a huge overload of homes – and many of these projects remained incomplete because the amateur ‘developers’ lacked expertise and ran out of money. It became clear that there was an urgent need for stricter regulations within the Indian housing sector.

Strong Measures Taken

When the Modi government took charge in 2014, this accredited real estate developers association took the initiative to help the new government correct the flaws in the system. The Modi government introduced RERA and made a ‘surgical strike’ on black money with DeMo in 2016.

Both these moves helped to remove unorganized builders who did not belong to any association and did whatever they wanted – with disastrous effects. CREDAI actively backed this new reform and went a step further. Its developer members collectively decided to begin curtailing housing supply so that the excess supply could decrease and the market could stabilize again.

The results of these combined efforts were impressive. By the end of 2017, for the first time, housing sales were more than new launches – according to property research firms, new housing supply in the top 7 cities had come down to 1.45 lakh units even as over 2.11 lakh homes were sold in the year. Homebuyers were encouraged by the new transparency and now knew that dealing with inexperienced, unscrupulous builders would only end in grief.

The Mission Continues

Today, India still has a lot of problems, including unsold housing supply. However, organized developers now have a plan of action which is emphasised at every meeting and conference of this association. Confidence must be restored, and this can only happen when developers and homebuyers work together as partners. Homebuyers are stakeholders in the Indian housing industry, and it is every organized developer’s responsibility to defend their rights.

At the same time, the government must be made aware of problems within the industry as soon as they emerge. Unlike in previous years, the government now listens attentively to organized builder associations and takes necessary corrective steps. In this manner, both real estate developers and homebuyers can look forward to a better tomorrow where homes are affordable, worth the money that is paid for them, and provide a lifetime of safety and security to Indian families.

A Forum for Technology Adoption

Technology is another major change factor in Indian real estate today. Here too, builder associations create awareness about the latest real estate technologies which all members can use to build better, cheaper and stronger housing projects.

This kind of knowledge exchange would not be possible without the collaborative approach which CREDAI has adopted. In the coming years, we will see the latest construction technologies being used to build better homes in shorter periods, and every developer will have access to them.

Pan-India Presence

It is important to remember that CREDAI is not just active in India’s largest cities, but across smaller cities and towns as well. In the current changes brought about by the coronavirus pandemic, these smaller cities have become very important. The work-from-home culture has resulted in more and more housing demand in these cities.

We must ensure that the progress being seen in the metropolitan cities also penetrates into every part of the country – for the betterment of the whole industry, and to benefit each and every homebuyers in India.

About the author:

Anil Pharande is CMD of Pharande Spaces, a leading real estate construction and development firm famous for its township properties in West Pune. Pharande Promoters & Builders, the flagship company of Pharande Spaces and an ISO 9001-2000 certified company, is a pioneer of townships in West Pune. Anil Pharande is also Vice President – CREDAI (Pune Metro) and a MahaRERA conciliation forum member.

Mumbai-Pune Expressway is the New Development Lifeline

Anil Pharande

A report published by Oxford Economics states that India will have most of the world’s fastest-growing cities between 2019 and 2035. Strangely, Pune is not included in the list of 17 cities where Bengaluru, Hyderabad and Chennai are mentioned prominently. But perhaps this is not surprising since the research is based solely on GDP growth.

The fact is that Pune is very much among the fastest-growing cities in India and even the COVID-19 pandemic, which is now getting under control in India, has not changed this fact.

The city’s economy generates a lot of jobs which attract people from all over. Pune remains a dominant employment generator in India because it is driven by three major industries – manufacturing, IT/ITeS and services. These jobs attract people from other cities and the rural areas, which in turn creates demand for housing. The only fitting response to this demand is real estate development.

Let us try to understand how the growth of a city should be defined. While it is definitely important, GDP is not the first aspect which comes to mind. The way most of us define growth is in terms of geographical expansion. The reason why cities expand is inward migration of population from the rural areas and also other parts of the country.

Of course, a city needs to have the capacity to grow. In all these aspects, Pune has been a forerunner in growth. While some of this expansion is haphazard and resulting in unnecessary oversupply, we are also seeing directions of growth which are vital for Pune’s sustainable future prospects.

Inward Migration – The Key To Real Estate Growth

Trends indicate that about 25-30 Indians are migrating to Indian cities every minute. Pune and Mumbai draw the most inward migration in the state of Maharashtra, which is the 3rd-largest Indian state in terms of area. Pune’s city limits have been constantly expanding to accommodate this migration. Mumbai, on the other hand, has very little capacity for expansion.

If you have been wondering why Pune’s developers kept building more housing projects even though the housing market has been slow over the last 2-3 years, the main reason is inward migration. Absorption may have been slow because of the disruptions caused by policy interventions like RERA, but the demand for housing in Pune is growing constantly. In reality, developers are building for the city’s future, not its present.  

Expressway To Growth

The biggest thrust of Pune’s development has been towards the financial capital of Mumbai. These two cities in many ways have a shared economy, causing a constant shuttling of goods, people and resources between them every day. Also, Pune sees a lot of housing demand from Mumbaikars who have business interests in Pune.  

Pune’s persistent growth towards Mumbai has been made possible by the Mumbai-Pune Expressway, which has reduced the travel time between the two cities to less than 95 km. The Mumbai-Pune Expressway has been the single-largest catalyst for economic exchange between the two cities. No other highway in India has opened up as many opportunities for the economic growth of two cities.

Not surprisingly, areas closest to the Mumbai-Pune Expressway have been witnessing a real estate boom. Already, the Maharashtra State Road Development Corporation (MSRDC) announced its intention to open up 1000 acres along the Mumbai-Pune Expressway for development. Builders with historic land holdings in these locations are now actively developing them and seeing a tremendous response.

Moreover, areas adjoining the Mumbai-Pune Expressway have become hotbeds for real estate development. Employees not only from the nearby MIDC manufacturing belt but also from Hinjewadi IT Park have responded to the opportunity of owning homes in areas like Ravet and Punavale. Now, even the serene location of Urse, located right along the Expressway, is seeing real estate development in the form of a large integrated township.

According to data from Property Consultant ANAROCK, Urse (within 3 km radius) witnessed new launches of more than 7,100 units between 2013 to 2020 with avg. property prices presently hovering at INR 4,100 per sq. ft. In comparison to 2015, average property prices here have increased by more than 11%.  Trends further indicate that out of the total new supply since 2013, a whopping 75% is already sold out while over 65% is ready-to-move-in.

Besides affordable prices and future growth prospects, housing demand has so far been driven by people working in nearby industrial areas.  The locality is also home to few logistics and warehousing options because of its proximity to Mumbai-Pune Highway. However, the profile of Urse is changing with the arrival of a luxury golf-themed township. In the future, the area is bound to see more high-end real estate options being made available.  

Gurugram-based realty portal Zricks.com confirms that Urse is attracting many investors due to the availability of various different property options in the locality. The presence of social infrastructure facilities such as transportation, education, healthcare, shopping and entertainment facilities in and around the area is an added advantage.

As a result, Urse is seeing robust real estate growth and this trend will pick up pace as Pune and Mumbai grow closer to each other via the Expressway.

‘Real’ Growth Is Not A Number

Economic performance or GDP of a city is obviously an important factor for geographic expansion, but only because GDP is the result of the city’s ability to generate jobs, which in turn generate demand for real estate. Pune has been able to expand to accommodate the increasing demand. This is the essence of the growth of a city.

This pattern of expansion has also been seen in the National Capital Region (NCR). However, there is a massive problem of oversupply in Delhi-NCR because it has expanded away from – rather than towards – its main employment hubs.

While Pune is expanding in many directions, the most critical direction is obviously towards Mumbai. The important task at hand now is to open up more and more areas along the Mumbai-Pune Expressway for good quality real estate developments. This process is underway and is constantly bringing the two cities closer together.  

About the author:
 

Anil Pharande is CMD of Pharande Spaces, a leading real estate construction and development firm famous for its township properties in West Pune. Pharande Promoters & Builders, the flagship company of Pharande Spaces and an ISO 9001-2000 certified company, is a pioneer of townships in West Pune. Anil Pharande is also Vice President – CREDAI (Pune Metro) and a MahaRERA conciliation forum member.