Residential demand remains strong in all major cities: Bijay Agarwal, Salarpuria Sattva Group

The real estate sector in India is going through a transitionary phase and is likely to emerge stronger and more mature, says Bijay Agarwal, managing director, Salarpuria Sattva Group

India’s real estate sector will quickly adapt to the recent regulatory changes, like demonetisation, RERA and the GST, according to Bijay Agarwal, managing director, Salarpuria Sattva Group. In an exclusive interview with Housing News, he maintains that the long-term prospects for the real estate sector remain bright.


Q: Did developers anticipate that the market would slow down to this extent?

A: We had anticipated the slowdown much before the introduction of the Goods and Services Tax (GST) and the Real Estate (Regulation and Development) Act (RERA). Whenever there is a new law or regulation, the changes are bound to impact any market and we need to tread cautiously, during the transition phase. At the same time, the impact usually does not last long, as people adapt to changes quickly. We continue to see good traction in our business, despite these market challenges.


Q: To what extent have the market uncertainties affected your topline and bottom line?

A: Fortunately, the Bengaluru market has not been significantly affected. There has not been any major change in the topline. However, due to the pressure on sales, the bottom line has been affected by 10 per cent.


Q: What lessons have been learnt, from the market uncertainties of the last five years?

A: Every sector matures over a period of time and real estate is no exception. Every developing country has gone through this phase, as laws are promulgated when a particular sector grows at a good pace. In fact, the real estate sector came into prominence, only in the last two decades, following the liberalisation of Indian economy. Reforms were introduced in the sector only recently and the much-awaited RERA was implemented this year.

There are many more reforms that must be introduced in the real estate sector and they are definitely in the pipeline. It is still an evolving sector and uncertainties are part and parcel of such a business. Organisations with strong fundamentals and superior business values, will survive and thrive.


Q: How has the sector coped with the after effects of demonetisation?

A: Very few established players in the real estate sector dealt with cash. Hence, established brands have not witnessed any major adverse fallout. Buyers are now a bit cautious before selecting the home of their choice, because of the changing dynamics in the financial market.


Q: Have RERA and GST affected the business cycle?

A: RERA has empowered home buyers, by bringing in more transparency and accountability. RERA will motivate those who were not planning to invest in a home, to rethink their decision. The impact of GST’s rollout will be temporary, till those involved get accustomed to the new regime. We expect normalcy to set in gradually.

See also: New regulations have put buyers in the driver’s seat: Ashish R Puravankara


Q: Has the consumer confidence index gone up or down?

A: With the availability of abundant data online, the consumer today is well-educated about the industry, the developer and the project that they are considering. Implementation of RERA and GST have increased transparency. Bengaluru has one of the most disciplined real estate markets. Hence, consumers’ confidence, vis-à-vis established players, has been always good. Going forward, there should be greater positivity.


Q: According to you, which cities are in the best position and which ones are worst positioned?

A: We operate in a limited number of markets. In our experience, the southern markets are performing well. Bengaluru has been performing well, while Hyderabad and Chennai’s real estate markets are stable. Mumbai has also witnessed a lot of new launches.


Q: To what extent is the slowdown in metropolitan cities, tempting you to consider tier-2 and tier-3 cities?

A: Expanding to multiple cities, especially tier-3 cities, has not been fruitful for the developers who are established in metro cities. However, tier-2 cities can be considered, depending on the project.


Q: Which segments, according to you, are safe bets in today’s market?

A: The demand for residential assets, continues to grow in all the major centres. Similarly, commercial space, especially office space, is in demand in Bengaluru and Hyderabad. However, these trends are cyclical in nature and therefore, it is difficult to say whether investing in a particular segment is a safe bet.


Q: What is your outlook for the real estate business, in the medium to long term?

A: We are very bullish, particularly after the implementation of RERA and GST. In the short term, the situation may remain similar. However, in the long term, after 12-15 months, there will be 20%-25% appreciation in the market and demand will be substantial. This is long overdue.