MD & Co-Founder of Hiranandani Group speaks about the recovery in the real estate sector and other emerging growth areas
The gradual opening of cities and the continuing mass inoculation drive has given big hopes of a quick rebound in the realty sector, post the second wave of Covid-19 pandemic. While construction activities has resumed across India, the realty sector sees some emerging trends with investors continuing to bet on different classes of assets.
Niranjan Hiranandani MD & Co-Founder of Hiranandani Group & Ex-President, Assocham, spoke to BusinessLine about the recovery in real estate, emerging growth areas, economic growth and resurgence of manufacturing sector etc. Edited excerpts.
How is India’s investment landscape shaping up in the post-Covid-19 era?
At the global level, India is still the focal point and preferred destination in terms of opportunities. With surplus funds in the US and lower or no projects in that country, investors have been looking for opportunities elsewhere. Since China’s flavour is a little lower in terms of investments, India scores a bright chance now.
I think Prime Minister Narendra Modi has also done a good job by portraying the right image about the country. If I talk to people in the US and Europe, people are betting big on India. India’s capital market is the number one positive story, and it should continue in view of the surpluses of the money worldwide and a lot of opportunities.
India offers particularly for people who want to diversify from China. Earlier, investments were primarily flowing into capital markets. Now, investments into India are happening in different formats and are coming directly. This is big positive news.
How about investment flow into the realty sector?
In real estate, REITS (real estate investment trusts) have picked up well. A lot of players like Brookfield, Blackstone, Embassy are putting in money in commercial assets.
This is a very big story because the investment flow happens in spite of Covid-induced new developments such as work from home and other associated things. These REITs have come up as commercial assets and they present a long-term positive story.
Which are some of the demand drivers for construction activities?
Under Union Minister of Road Transport and Highways Nitin Gadkari, highway construction is happening at a frenetic phase as a record length of (35 km+ of road per day) of new roads are getting built.
While it has a huge positive impact on warehousing and logistics segments, it spurs demand for cement, steel and labourers. This is the reason why steel and cement industries are booming.
The other major demand driver for cement and steel is that PMAY (Pradhan Mantri Awas Yojana) scheme is on time. Under the scheme, 1.12 crore new houses are being delivered in 2022-23. It means ₹80,000 crore has gone into interest subvention to the buyers.
This has never happened in India’s history. This means affordable housing segment, i.e. houses less than ₹45 lakh and less than 60 sq. m, coming under PMAY scheme is tax free for the developer, while the buyer gets interest subvention of 3 per cent.
This means the buyer is getting the house at less than 4 per cent interest rate. These have driven overall GDP growth amid some stress in a few segments. There is an unlimited opportunity for affordable homes. While the growth story is a positive story, the government has to correct the aberration in land prices. Rental housing will see the next big disruption in the realty sector.
With PLI and other schemes, is India’s manufacturing story intact?
Yes, India’s manufacturing is coming back strongly and PLI schemes give the much-needed boost. Look at vaccine development and associated activities – we have produced vaccines to the world at the lowest cost.
Presently, I see two States are really taking the lead in the upcoming manufacturing growth. Uttar Pradesh has emerged as the number one, followed by Tamil Nadu. These two will have a big role in reviving manufacturing growth with the PLI scheme. In Uttar Pradesh, the entire defence corridor is taking off well and the Chief Minister of the State and the bureaucracy is extending all possible support.
Business facilitation and approvals and permission happen at a faster pace. Meanwhile, decisions are much faster and quicker in Tamil Nadu now. Also, infrastructure in Tamil Nadu’s industrial clusters is better today. Gujarat is working hard, while Maharashtra has to catch up.
How can States take advantage of the PLI scheme and attract more investments?
States have to ensure ease of doing business. This is very important to make things work and attract projects. Also, State governments should have end-to-end solutions. Requirements and approvals will vary from one company to another.
Some companies may require last mile connectivity, some others would seek higher bandwidth through fibre connectivity. Some manufacturing units require gas pipeline. Companies in new places would require widening of the road near the factory.
So, governments can address based on their requirements. This will kick start the project quickly and help run the operations smoothly. The overall benefit will be job creation.
Some sectors are still suffering. Should they be given a different set of stimulus measures?
In my view hospitality, aviation, MSMEs and the media are in difficult times. The Centre should focus more on sector-specific support measures. They have done it for MSMEs though still a major chunk of them are under stress. But they have not done so for media, travel and tourism sectors.
The Centre could think of short-term GST rate cuts for these segments for their revival. I feel the media is doing the job for everyone, but not for themselves. GST rate cut for advertisements from 18 per cent to 5 per cent for a certain period will help. This is my personal view.
We fought for a stamp duty cut and got it done. So, sector-specific measures should be there because every industry needs something to trigger the initial momentum.