With the Real Estate (Regulation and Development) Act, 2016, becoming operational in May, there are expectations that the sector will evolve for the better but not without some disruption. Mohit Malhotra, MD & CEO, Godrej Properties, told The Indian Express that a large number of old-time developers are approaching big, established players for surrendering their land or projects as they don’t want to pursue development themselves. Malhotra is bullish on growth and is evaluating several proposals that have come to them. Edited excerpts:
While Real Estate (Regulation and Development) Act, 2016 (RERA), became operational on May 1 and states are in the process of implementing it, what is the big change it has brought?
The industry is likely to see a lot of disruption. Over the last 6-9 months, many developers have decided that they don’t want to pursue projects any more. Many of them are approaching us and other large players, asking us to take their land or project and complete them. There are many such people in the market. That is a big change already happening and is something that all large and well established players are experiencing as small developers are looking for an exit. From the consumer perspective, RERA will bring a big corrective change and over the next two years, the industry will become much better.
What is the kind of exit do you see happening from the industry?
While there are an estimated 10,000 developers listed with CREDAI, I have a feeling that only around 10 per cent of them would survive. The issue is how many of these developers can customers trust with their money as of now as they have not been able to execute the project and are finding it tough to raise funds. Bigger players have no baggage and have done what was supposed to be done. People have stopped trusting old-time small developers.
Are you too considering to take over some under construction projects?
We will not get into any under construction project. For such projects, it is very difficult to find out if the safety standards have been followed, if the structure is safe and has the design and its implementation been proper. There are numerous problems and it is very difficult to do the due diligence on such projects. We would be interested in land parcels and would like to have a joint venture development model. We will evaluate and take any good opportunity that comes our way. There are several opportunities in the pipeline as people are coming with offerings of their land parcels and we are evaluating several of them. We are very bullish, especially on the NCR market and there will be many more projects coming from our side.
How is the demand situation in the market as of now?
This year has started on a good note for us. In the first two months of the fiscal we have sold close to Rs 1,000 crore of stock, which is already 50 per cent of what we sold in FY16. So the demand looks good but it will vary from developer to developer. I think the economy is growing at a good pace, the problem has been in our industry itself. Except for consumer sentiment, I feel everything is fine. The sentiments got hurt because people could not get their project delivered on time. They saw their money get stuck and developers financial health deteriorated thereby creating fear in the minds of customers. The commercial real estate is witnessing strong growth and many companies are expanding their office space. I see things improving further on the residential side too.
What are the changes that you would like to see within the industry?
While RERA will bring in a lot of changes, I would like to see some improvement in the frequent regulatory changes. Even the approval procedure needs to be simpler, transparent and faster. That is one area I hope will improve with a proactive and forward looking government. There has been some improvement in the overall situation and even the political interference has reduced but things need to improve further.
Do you see any improvement in approval time for projects? Earlier the launch of a project used to be on the building approval plan but under RERA, approval from the Ministry of Environment and Forest (MoEF) is required before a project is launched. MoEF approval takes around 6-9 months. If earlier it took 6-12 months for all approvals to come in, it will now take around 12-18 months but I don’t see it as a dampener. Its good and we will launch the projects after all approvals. However, the approval process should be streamlined and simplified. Why can’t the entire process itself be brought down to three months.