Real Estate

Real estate regulator will be good for the sector: Piramal

BINDU D MENON THOMAS K THOMAS Mumbai | Updated on January 16, 2018

bl02_Anand Piramal

Ever since the Piramal Group exited the pharma sector, one of its big focus areas has been the real estate sector. The company recently bagged one of the biggest investments into India’s real estate sector from Warburg Pincus and earlier from Goldman Sachs at a time when most other players are struggling in a weak market. The Group’s real estate business is being led by 31-year-old Anand Piramal who wants to build a credible brand for consumers. BusinessLine met him to know more about his plans.

How are the sentiments in the real estate market. Is it lifting?

The market sentiment is yet to recover. It will take about two-three years for a complete turnaround. In Thane, we have launched our project. Our target was to sell about 75 flats and have sold around 250 flats. We have also launched a commercial project at Kurla and launched Piramal Aranya, our flagship project, in Byculla. I feel if you are a good developer with a good project you should generate good business.

But you are seeing green shots?

Yes. Bad developers will take a hit. New policies and regulation have brought in a level playing field. Customers are agitated due to the delays caused, and hence, they are gravitating towards branded developers. Market recovery will happen but it will take two to three years before a turnaround. But four to five developers will continue to grow.

Unlike other developers who are open to co-developments and JVs, you seem to have chosen to go alone in most of your projects. Is that a strategic decision?

If we find the right partner then we will look at joint developments. In my joint development when we started off, we were disappointed by the quality of development. For all the effort it takes, we have to share revenue. But if things like construction costs go up then our revenue goes down. Historically, we didn’t want to go alone.

Private equities seems to be favouring you in a big way? What is it that they see in your company?

My father keeps saying that now that there is an outsider’s money so we have to look at it carefully. We have to track their returns as well. In the past, Warburg Pincus had done the deal with our other business. This time around they closed the deal with us in two weeks. They also saw our values. It is not just Warburg but five players including Goldman Sachs and Bain Capital Credit, CPPIB, APG (at Group level). We have grown with our partners

Why do you need a Warburg Pincus or Goldman Sachs when you can mobilise funds through internal accruals?

In India, it is difficult to have access to streams of capital. The country is large and access is restricted. We have always worked with partners. It is a about building a company from the start. They saw our track record in giving returns.

As far as I know, it is the first entity level infusion in real estate. They give us capital and help us strategise and bring partners. Their expertise is huge. They have built companies and it is a privilege to work with such players.

What is your current investment in real estate and total area under development? Where do you see it three years from now.?

We have about 10 million sq feet including both residential and commercial, currently valued at ₹16, 000 crore, including land, execution and development.

We may look to double the area in three years. We are focussed on growing the value of our investors.

How big is your land bank and are you looking at distressed assets?

We have projects in Byculla, Mulund, Kurla, Worli and Thane. We are actively looking at assets.

You are not looking at retail space developments especially since you have a history of developing one of the oldest retail malls Crossroads in Mumbai?

Today most retail developments are part of our residential development. We are not looking at retail development. However, at our commercial project – there will be some retail space. Also, Piramal Vaikunth has retail development scope.

Buyers and developers have burnt their hand in the recent past. Is there a trust deficit?

There is huge trust deficit but people have supported us. Some developers want to cheat the buyers. Some developers didn’t expect the delays. The overheads have increased. So they have burnt their hands. We have also addressed the issue of trust deficit. We have introduced the Piramal Assurance scheme. We buyback from the buyer in case we don’t meet their expectations.

Piramal Assurance ensures peace of mind to its customers. A customer can return the purchased unit to Piramal Realty, no questions asked, at 95 per cent of the market value any time until possession.

The proposition underlines Piramal Realty’s belief in creating a quality product for the end-user.

Are you in favour of real estate regulator?

It is an important and positive step for the industry. It will be stringent for smaller developers. For good developerws, it is a right step.

At the strategic level, is the plan to grow business to a scale and then move out of it?

We have long term advantage of this business. We are here to stay. Each of our business has to stand on its own. My father has always said that our business has to be independent of the group or even outside funds. All of our businesses today are growing.

Published on September 02, 2016

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