Interview with Khaleej Times

These are the excerpts from an interview given to a correspondent from a middle eastern leading newspaper sometimes in 2007. When I stumbled upon some of our utterings earlier, It was easy to pat ourselves on our back to think through how & why we were proven right about our projections about the Indian real estate scenario emerging.

1. What are the reasons for the buoyancy in the real estate sector in India?

· As most consumer driven businesses, the demand Vs. supply gap is the key driver of the buoyancy. This buoyancy leads to better internal rates of return for the investors, both financial as well as developers. Therefore, this sector attracts financial investments.

· The availability of land @ cheaper prices also drives the higher margins.

· The investments into the business sphere, both in the manufacturing as well as the service sectors create jobs, higher dispensable incomes as well as the lowering of the age of the buyers.

2. Do you expect prices to continue growing in 2007? Or is there likely to be a reaction, with prices cooling down?

· We deduce that the investors would take a more analytical approach towards investments. Rather than flow with the tide, the investments would be more project driven. Due diligence would have to be undertaken on factors governing specific projects, rather than the euphoric sentiment.

· This could lead to price correction on projects which are sentiment driven and were artificially inflated. Where the value offering was not commensurate to the product price.

3. With the real estate sector attracting billions of dollars – by way of private equity investments, IPOs, FDI inflows, and raising of funds in overseas markets like London’s AIM – do you see a glut of projects over the coming years?

· No. Rather, the number of projects announced already by the India developers would require more than a few billion dollars invested. We would see more than US$ 10 billion being raised by the India developers, in 2007-08, by way of IPOs, PE funding etc. These funds are not only essential but also vital towards the desired pace of development.

· Also, development would see a re-definition of the character of the value offerings.

4. Are Gulf-based NRIs also investing large amounts in Indian residential and commercial projects? Are they doing it for investment purposes, or acquiring properties for their own future use?

· Both. It is very subjective to the defined purpose of the investments. On the one hand, we have Emaar & Nakheel issuing confidence by participating in multi million dollar development deals; and the retail investments flowing into residential and office blocks coming from individuals.

· Indians still echo the sentiment that investing into India is safer than acquiring real estate in the Middle East.

5. What has been the response from NRIs based in North America and Europe? Are they too ploughing money into the sector?

· Yes. In fact, one particular report reveals that Indians from the USA have sent back 4 times more money than their counterparts from the Middle East. Since real estate is an avenue where their money parcels are welcome, this segment has the realty industry identified as one prime channel of capital growth.

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