In a freewheeling chat with the TNSE team, Secretary of Confederation of Real Estate Development Authority of India (CREDAI) Suresh Hari shares the present status of the realty industry in Karnataka and the way forward for the sector. He speaks about checks to be done before a buyer invests in a property, changes that work from home culture have brought in and the crucial role the government plays in providing affordable housing etc.
Give us an overview of how the real estate sector is doing in Karnataka.
This is going to be the next big sector of growth in India. Even the American and European markets have identified this. Some of the biggest investors are betting big on Indian real estate today. I read a report that in road infrastructure development, we have overtaken China. We are now heading towards America. Nitin Gadkari (Union minister for road transport and highways) has kicked off a lot of projects and when infrastructure grows, everything grows. Road infrastructure is important, specifically for the real estate sector, as commuting, reachability and mobility become better.
Coming to the real estate scene in India, 2019 was looking really bright for us. By December, it seemed that it was a big leap for the industry. Then, the pandemic knocked at the door and it took a big hit. But interestingly, real estate players at that time went low and not overboard. Two factors contributed to it. One was the issue with labour, which was not available and did not allow us to continue with our work, and second was the market demand. The two years of the pandemic taught us a lesson to realign our portfolio. The remodelling and changes in utilisation of space occurred. Office spaces were assuming a different nature altogether. Employees did not want to sit in the same space for years, and the work from home culture became the in thing. With that, people started moving outside the city and peripheral areas and even to their villages. This indirectly helped city planners as a lot of mobility and transport issues were averted. The industry again picked up. There was not much tumbling in the real estate industry post-pandemic. The ease of doing business at the Central level is good, while many states are coming out with models. Karnataka recently announced architectural certification, which will make ease of doing business better. Self-regulation is better than the regulator regulating it.
Has work from home reduced the demand for office space?
It has to some extent. Work has become hybrid now. People are not stuck 24x7 at home as human relations matter. WFH will not survive for long. It has brought in certain changes in residential conclaves. People look at larger spaces where they can isolate themselves and work and communicate. Or, they can stay inside the house if they can find some space where they can get some privacy.
Coming to Tier-2 and Tier-3 cities, should the government create the infrastructure first and invite the real estate sector to invest or should the investment be made first from the industry side?
It is like the chicken and egg story as to who does it first. Our planning is for the next five years and then we execute it in another ten years. By the time we execute it, it has already overgrown its need. We start planning again. The speed of the work is important and action is important. That is where we lack.
What is the potential for growth and reach here?
Quite a lot. If you take the connectivity between Bengaluru and Mysuru, it is one of the best. Major growth can be expected in Mysuru. Similarly, if you take Hubballi-Dharwad or Davangere, the areas are growing faster now. Hubballi is getting crowded and so you go towards Dharwad. You will go to Belagavi next. Everywhere Tier-2 and Tier-3 cities are picking up.
Has real estate not penetrated deep inside the state?
Not much. We have the CREDAI chapters in ten cities in Karnataka. Growth is happening there. Tumakuru Highway is chock-a-block now because of the flyover issue. It has to be addressed somehow and that road has much potential. Then Tumakuru will become the next big nodal point for growth. If you see the Airport Road, the parcels of land are blocked. No development has taken place physically, but the lands are blocked. Terminal-2 has come up now and empty parcels in between will all grow now. These are possible extensions happening.
If you take other countries, for instance China, the government develops the infrastructure first. It lays roads and sometimes invests in housing and other aspects, and makes people move there. It is possible there as they relocate people compulsorily.
How is the real estate sector looking here compared to other States?
Compared to other cities in the South, Bengaluru is doing well. Hyderabad is next. Weather-wise, Bengaluru has the edge.
What should the average buyer look out for before investing in real estate?
Many buyers are tech-savvy, but do not look into basics before buying a house. They do not look at whether a proper plan has been approved. Hardly around 20 per cent of builders belong to CREDAI. People should first check the legality of the papers. We have RERA now, but it should have been there 50 years ago. It has become another parallel regulator now. The problem we really face is the complexity of laws. We have multiple laws and this is leading to multiple interpretations. We should have simple laws. Human interference should be stopped. Self-regulated plan approval is a good step.
The buyer should look at the legality of the title which they are buying. The government has amended many laws. If somebody has developed the land, you should check with the authority. You must check if the parcel of land is genuine or not. That is the first check you must do. You are not investing small money. Check in the neighbourhood area. Check if the plan has been properly approved and whether the building is being done as per plan. Banks are also looking at their clientele but do not assume that they have checked it 100%. But they are not monitoring it on a day-to-day basis. You have to do the due diligence. If you don’t do that, you will be paying a price for your negligence.
Despite all the checks, many buyers end up losing their life savings on a regular basis to builders. RERA lacks the teeth to bring them to book. What is your view?
I agree that there is an issue in some cases, but you cannot tar everyone with the same brush. Problems have occurred in some cases. In others, the builder is genuinely facing issues in handing over. The ESCROW account came into place only after RERA came into operation. That is a good move. In some cases, the builder is genuinely facing issues in handing over the project with the cost agreed upon. The builder needs to sit across the table and speak with the buyer. In CREDAI, we used to have the grievances cell and the problems were sorted out at the initial stage. It is an ego issue in some cases.
RERA has created a kind of self-check and has protected the customer to some extent. There is also the other side where the buyers create problems by not making the payment on time.
The government constantly speaks about affordable housing. But it does not seem to be a possibility in Bengaluru as any house within a crore can be bought only in the peripheral areas of the city.
Coming to affordability, parcels of land available in the city are very limited now. In such a situation, the regulator, that is the government, has to play a big role. A regulation was brought in some time ago to reserve a percentage of the development for affordable housing which was rejected by the court. The government should come up with land parcels and demarcate portions for affordable housing, to allow beneficiaries to have the comfort of living. There are interest schemes available and those who are buying these homes should approach the banks and take advantage of these interest schemes.
To give an affordable home within the city is a challenge as the land cost is fixed. It is still worth the investment if one buys a house a bit away from the city if commuting can be managed as the city will definitely reach there in the future. The price of the property will shoot up. The government is the biggest beneficiary of real estate. We tabulated this calculation some time ago. A total of 28 per cent of all your investment goes to the government in some form or the other.