Real Estate

Indian industry needs structural reforms for long-term growth: Niranjan Hiranandani

Forum Gandhi Mumbai | Updated on March 25, 2020

Niranjan Hiranandani, Co-founder & MD

The pandemic has come as a fresh blow to the Indian economy, which was already struggling with a slowdown, macro headwinds, geopolitical issues and acute liquidity crunch. Speaking to BusinessLine, Niranjan Hiranandani, founder and MD of Hiranandani Group and National President of Assocham, shared his thoughts on the way forward. Excerpts:

What is your view on the present industry crisis and Assocham's representation for that?

I think it’s quite clear that we are going through a crisis. It’s twofold. In the short term, we are making representations to the government on the lack of liquidity, NPAs, NCLT, payment crisis and non-availability of materials coming from China because of the coronavirus.

Structural reforms are required to make a change in the industry, business, trade and banking system in order to achieve long-term growth.

So what, according to you, is stopping it?

We need to develop at a fast pace — that’s lacking. We need to look at what our counterpart countries are doing, look at how we can better it and outdo ourselves as a country.

What were the representations you made to the government post Budget?

We have made a representation on the fact that the taxation (on) dividends is especially going to affect REITs (real estate investment trusts) and InvITs (infrastructure investment trusts), which needs to be corrected. Secondly, the 42.5 per cent tax on individuals is certainly extortionate and needs to be corrected.

There is currently only one listed REIT in India. Does Hiranandani Group plan on a REIT?

There are lots of InvITs that are already done and we expect that this year, at least $30 billion worth of REITs and InvITs will happen provided the taxation system changes. We will look at REITs in the next one-two years provided the tax system changes. Currently it’s not viable.

The real estate sector has seen a heavy slump and now the coronavirus is making it worse. How do you view the current situation, and what can the industry and the government do to turn it around?

The target of affordable housing and urban area development of the Prime Minister...we are going to achieve that by 2022, at the most 2023. Of course, cities like Mumbai and Delhi may not be able to achieve that target for various reasons, including unavailability of land, but otherwise we will be able to achieve it.

The Hiranandani Group has grown three times in the last five years. We are doing extremely well. The changes that took place — demonetisation, RERA, insolvency law and GST, one after the other — really caused a crisis in terms of the requirement of cash and liquidity. That has increased and we have not been able to meet it.

There are not enough funds available, too...

That’s a systemic failure...banks and financial institutions just have not been able to meet the requirements of the economy. Post demonetisation, money came into the banks, but the banks have stopped lending. So we have ₹3-lakh crore lying in the banks, which is not being lent.

How does the coming fiscal look for the Hiranandani?

This year, we saw the biggest growth for our company in our careers. We are planning to grow two times in the next two years. We recently did a JV with Blackstone. We invested ₹1,000 crore in data centres.

We are starting Alibaug as a new project and expanding Panvel. My son is putting up a gas project, which is 5 million tonnes of gas to come in from Jaigarh into the grid by April 2020.

In (subsidiary) GreenBase, we have started three locations — Pune, Nashik and Chennai — where the land parcels belong to the Hiranandani Group. We want to add another three or four centres in the next six months as the opportunity comes.

The US Federal Reserve has been cutting rates. Do you think the RBI also needs to cut rates?

I think more than cutting rates, the effectiveness of the cut rate should be passed on to the customer. And we have to see how more effectively to do it though, already, some things have happened. There are not enough banks and NBFCs and enough liquidity, so they can always say ‘we won’t cut the rates’ and still people will take (loans). Now, with issues with other banks like YES Bank...(it is) all the more reason why they will increase the rates and not reduce them.

Published on March 25, 2020

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