Are These Real Estate Views Surreal or Real?

Think out-of-the-box about entering new segments like making villages smart or infrastructure rather than brooding over demand for premium real estate India’s top tier metro cities only: Nitin Gadkari calls for a radical change of approach while addressing the real estate builder fraternity during the Naredco Knowledge Webinar

By Namrata Kohli

The Road Transport and Highways Minister shocked everyone at the outset with the statement that he has no dearth of either funds or demand. His ministry has triple the work and the budget runs into several thousand crores. The developers need to work in newer segments where there is real demand and not stick to the old ways. He quoted how automobile maker Mahindra has tweaked its supply to make more tractors rather than ranting about lack of demand for its cars. The corona war we will win but soon after there is an economic war we will have to wage. It can’t be done unless we have the mindset to win and changed ways to business, said Gadkari.

He made three major points. First, nothing will work unless there is bulk production at lower costs. For this, developers need to do due diligence on finding new materials and technologies that allow them to scale up at lower cost. Quoting example of China, how they found an alternative brick which was both cheaper and more durable than conventional brick, and made low cost homes using pre cast technology. Like that, can developers make 500 sq ft homes in rural India which can be sold at the rate of Rs 5 lakhs- he asked. This means if the selling cost is Rs 1,000/sq ft, everything from cost of construction, power, logistics, labour needs to become competitive. A hunt for the most affordable materials and technologies is an imperative now to survive first and later even capture the world market.

Second, he urged the developers to work in areas where demand is. Rather than fancy offices and upmarket residences in urban areas, lets make the villages smart. Shift to projects in the infrastructure segment – the ministry has a budget is 15 lakh crores and has to build 2,000 bus stations, logistics parks, medical and paramedical colleges, railway overbridges. There is demand within public sector for homes such as the defence segment needs 8,000 homes immediately.

Third was a touchy topic about cutting prices. Earlier Mr Deepak Parekh had pointed it out by suggesting a dramatic 20% decrease in property prices. Gadkari said that certain builders in Mumbai are still holding onto inventory at the rate of Rs 40,000/ sq ft. It’s time to sell at the price you are getting, clear debts, bank loans, get liquidity and move on. That time has gone when you were selling thing worth Rs 10 for Rs 15 – now you will not even get Rs 8. These are times for thrift and budget housing.

My Take: Unconventional, Uninhibited, Unusual – that is how I will describe the webinar with Nitin Gadkari. The biggest takeaway is that post Covid era will be a different world altogether. With the skill set, raw material, infrastructure that a builder has, he must look at alternate sectors – build infrastructure and cater to the untapped demand in rural India, logistics, and other underserved markets. World will be different in post Covid era. The era of inflated pricing is history. Everyone needs to switch gears to work in the direction of demand. Sail where the wind blows rather than against it.