(MENAFN- Khaleej Times) The demonetisation of the Indian rupee gave a jolt to the real estate market, but it will ultimately not have much of an effect on it, says Irfan Razack, chairman and managing director, Prestige Group, Bengaluru's top developer.
"It was a disruptive step that many people got a little alarmed," he says. "There were a lot of rumours that the next step the government would take was to prohibit people from buying more than one property."
According to Razack, in a democratic society like India, laws cannot be changed overnight as they might prove counterproductive. Such steps are never taken in the country.
The construction and real estate sectors are the largest contributors to the Indian economy. India, he notes, is still a developing economy. About 35 per cent of the country is urbanised and by 2020-21, the figure might go up to 50 per cent.
"Obviously, you need more homes, offices and leisure spaces," he says. "There will be congestion and huge traffic, so the urban infrastructure has to be developed."
Infrastructure demand
Urbanisation, points out Razack, is a reality as demand for infrastructure in cities is growing rapidly. Many cities have been developing metro railway lines to smoothen commuting. "Cities are attracting a large number of people, who come seeking jobs," says Razack. "Sectors such as manufacturing, IT, biotech and services are providing the jobs."
He ridicules the idea that the real estate segment is witnessing a slow death. There is a real shortage of homes in India across different segments, from super-luxury to the bottom of the pyramid.
"The maximum demand is in the mid to lower-mid segment," he points out. "The needs are real." Supplies might temporarily get slow following the introduction of the new Real Estate (Regulation and Development) Act.
But it will bring in a lot more transparency and discipline to the industry and professional players will emerge successful.
Razack says buying will continue as the demand for homes will always be there. But pricing in southern cities, including Bengaluru and Hyderabad, have not gone up much.
Thin margins
"There is not much of a gap between cost and selling price and margins have remained thin," he says. "The question of prices coming down does not arise." Even in cities such as Mumbai, it is only a few localities where prices are sky-high. Prices are reasonable in most other areas.
The Prestige Group, founded in 1986, has a turnover in excess of Rs35 billion. The company has completed nearly 200 projects covering about 80 million sq ft. It has more than 60 ongoing projects spanning more than 60 million sq ft, and upcoming projects of almost 50 million sq ft.
The group has diversified into other areas offering services such as interior designing and men's formal dressing wear. It has operations in cities including Bengaluru, Chennai, Hyderabad, Kochi, Mysore, Mangalore and Goa. Besides homes, it also develops malls, large townships, tech parks, hotels, luxury villas and special economic zones.
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