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you joined us last year at the real
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estate forum what changes in the global
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real estate market of surprised the most
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over the past year well let me restrict
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my comment to India I know more about
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India than I do about the global real
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estate market but if you recall last
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year's podcast I had actually expressed
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a fairly high level of confidence in how
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I saw the Indian economy in general and
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indian real estate market coming out of
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the recession I think in fact one of the
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the visitors to your website had written
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some comments about my broadcast which
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you know I think he had some doubts
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about the the confidence that I had but
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I think looking back on the past year
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certainly you know I think a number of
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comments that I made a year ago have
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fortuitously you know proved to be
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correct recently the Indian government
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announced the the last quarter GDP
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growth which came in at seven point nine
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percent which certainly was a very
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pleasant surprise i think people are not
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expecting the economy to come out or so
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fast and at such a fast pace I think
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that the other thing about global real
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estate markets that has been a surprise
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has been you know this I anticipated
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crisis like the commercial real estate
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market which we haven't yet seen I mean
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people have referred to it as the other
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shoe dropping even in the conference
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this morning they've been references to
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the whole commercial real estate
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situation and I certainly don't think
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we're out of the woods I'm and I think
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we are we may yet faced some issues then
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but I was expecting that to happen yeah
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much earlier than it was hmm on the
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whole what do you think has buffered the
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Indian market the most well you know a
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friend of mine who's as a mechanical
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bent of mine you know he was saying to
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me once 10-15 years ago you looked under
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the hood of a car and he knew pretty
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much how everything worked and how you
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could fix it and but now of course if
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you look under the bonnet it's all
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microprocessor controlled and software
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control etc so it's very hard to
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to make out words in some ways you know
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the Indian economy is like the car from
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15 years ago that you can look under the
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hood and fix it doesn't have the
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complexity if you like that that the US
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or European markets have we didn't have
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mortgage securitization within a
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mortgage-backed securities we didn't
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have any kind of asset securitization
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you know mortgages account for maybe six
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percent to the GDP so very small
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proportion so you know let's in terms of
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complexity it was probably a much easier
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economy to manage to steer through this
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this storm but of course you need the
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political will to do that and the
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knowledge to fix the problems we've been
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very lucky that we actually had a
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government come in with a clear mandate
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we've gone through a period of
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coalition's but the last election saw a
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clear majority for the Congress party
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which meant that you had the political
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will to address the issues and we saw
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that with the SAT them fraud case where
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the government acted very swiftly and
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fix the issues and the other the other
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side of it of course is the the
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knowledge so I think a lot of credit
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must go to the way the financial market
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regulators and the government have
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steered the economy through the crisis
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the other thing I think is that the
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Indian economy is much more dependent on
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private consumption private domestic
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consumption if you think about you know
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the the contrast with China I mean I I
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like to say that when I when an American
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man American consumer walks into walmart
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and buy something the Chinese economy
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benefits whereas when an Indian consumer
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walks into a shop in in Mumbai or in
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Delhi and buy something that's where the
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Indian economy is growth comes from so
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having that major driver with in control
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private domestic consumption as opposed
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to depending on exports depending on
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services unlike you know has has also
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helped the economy substantially so if
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in fact you see a kind of D linking
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between the stock market and the real
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economy because the stock market
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obviously depends a lot on capita
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flows in and out portfolio investments
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etc so the stock market was was affected
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but the real economy was was was
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shielded by these two factors good
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management and basically a strong
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domestic demand base would you say that
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there are still some lingering risks for
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investors in the market certainly I
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think that the risks in India are
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probably very similar to the risks in
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the US and that we are also faced with
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very high budget deficits you know which
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is a which is a major challenge now we
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are susceptible to because we're a net
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oil importer we are susceptible to what
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happens to gas prices energy prices and
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the growth has to be fueled by energy
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imports by and large so I think those
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two things are key you know they're
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potentially issues to worry about the
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other I think area that investors need
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to be cautious about is obviously what
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is happening with with the regulation
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regulatory changes the country is
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becoming more transparent in fact the
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new Companies Act is coming in very soon
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replacing something that goes back to
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the British times the government is also
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put forward a model bill for real estate
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regulation which is long awaited and
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would introduce transparency into the
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market and much more much more certainty
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but on the other hand one hopes that it
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doesn't simply just introduce additional
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bureaucracy as far as the real estate
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firms and developers attention a number
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of investors global real estate
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investors talk about the red tape that's
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involved when entering a market like
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India is that changing it all in your
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opinion well I think yes you know I mean
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I think one has to realize that India is
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a very large country and it has a
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federal structure which is very similar
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to the US so therefore you're subject to
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federal laws or what we would call union
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laws you're subject to state laws and
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you're of course subject to the local
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municipality parity laws you know in
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that of course leads to a lot of
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complexity and a lot of red tape
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but that's just a you know a reality of
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the geography it's not like investing in
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Ireland or Belgium or something like
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that which is a much much smaller you
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know smaller countries Molly economy
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certainly the bureaucracy faces you know
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it poses a challenge not just for
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foreign investors it poses a challenge
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for Indian investors also but I think
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the advantage that Indian investors have
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is that they know they know how to
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navigate through the system you know
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what is required to be done and I think
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that's where the value of a local
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partner for a foreign investor becomes
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critical right and what would you what
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advice would you give to to investors
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looking to to move into the Indian
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market what sort of key things they need
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to keep in mind what are critical the
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age-old rule of location location
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location applies to Indian real estate
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as much as it does to any other in fact
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because India is so large the rates of
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growth are diverse I mean if you look at
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a state like Gujarat in India for
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example Gujarat has been growing for the
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past ten years at a rate of twelve
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percent per annum the GDP of that state
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that's a faster pace of growth than than
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China on the other hand there are parts
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of India where growth rates have been
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much low so you know the the country the
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selection the area that you focus on is
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is critical you know you have to choose
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strongly growing micro markets you also
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have to look at states which have more
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transparent regulation more
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understandable processes so some of the
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states in the South in the West have
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much higher quality regulation in much
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higher quality processes and I think you
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have to focus on finding a local partner
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who's both experienced has a track
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record has a brand name because Indians
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of a brain conscious and in a foreign
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company enters India they do not have a
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brain presence so partnering with a
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local strong local brand is critical so
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I'd say these are these are three things
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to look at you know the location the
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choice of state and the choice of a
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partner and then lastly obviously the
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asset class I mean there are investment
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opportunities in India in a variety of
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asset classes residential commercial
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hotels hospitals in the area which is
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which is growing educational
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establishments service apartments so the
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opportunities are many and depends on
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the investors appetite and his
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investment thesis you know there are a
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lot of government programs right now
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they're helping regular citizens to
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afford housing and home ownership yes
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the government has done quite a few
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things first of all a large chunk of the
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banking industry in India is actually
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owned by the government so the major
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banks in there owned by the government
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and these banks typically have targets
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given to them by the government as to
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how much they must advance by way of
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mortgages to home borrows so if you look
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at state bank of india which is the
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largest bank their current target for
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mortgages is monthly 20 billion rupees
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so that almost half a half a billion
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dollars every month they're expected to
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lend in mortgages the government is
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making credit available easily the
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government has also come up with schemes
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for allowing mortgage interest to be
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written off of taxes the government has
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also come up with schemes which allowed
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developers certain benefits when they
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build affordable housing in other are
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there are certain other certain patterns
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of behavior in Indian consumers you
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think that are changing that are
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enabling homeownership that might may
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not have been present in the past
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different ways of spending I know that
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Indians are you know they save they tend
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to save so the question is I you know
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how are how is the government and how is
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the industry convincing people to put
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their money into home ownership as
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opposed to renting for instance well I I
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don't think that's such a challenge in
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India because traditionally Indians are
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viewed property and gold as two key
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investment asset classes and they've
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always had them in their portfolio if
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anything you know it's only recently
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that Indians are getting used to the
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idea of buying stocks or buying bonds so
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property and and gold have always been
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very important investment avenues but
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there are certain trends
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you know especially the develop into the
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nuclear family because traditionally
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Indian families have you know clustered
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together in large groups aren't uncles
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grandparents etc but increasingly with
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the urbanization you get the husband and
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wife and two kids type of family setting
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where you do need a home of your own and
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I think that is driving quite a lot of
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the the growth the development of the
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nuclear family and the migration to the
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city's Indian cities are growing growing
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rapidly and of course people when they
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move from the villages to the city and
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they want to buy a place to sleep place
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to stick now what about in the reverse
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direction I know that there are some
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programs that are working towards
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affordable housing in rural areas as
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well as hirako involved in any of those
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kinds of projects or are you interested
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in developing housing in rural areas at
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all or do you mostly stick to the metro
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areas into the large cities well here go
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actually is focused in what I would call
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an area in between rural and urban
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because you know we try to be near the
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urban metros simply because we want to
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leverage our customers want to leverage
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the existing connectivity that the urban
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centers have for example airports
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railway stations roads sea ports etc but
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at the same time we tend to stay away
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from the city centers or the city proper
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because obviously we can do large
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greenfield projects well outside the
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city limits so if you look at our
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project in Chennai for example it's
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about 60 kilometers from downtown
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Chennai it's a non-virgin green area 500
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acres but it has the advantage of being
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able to leverage the existing
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infrastructure of Chennai the second
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Airport that's coming up the national
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highway network if you go right out into
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you know with the country obviously the
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you've you're faced with challenges of
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infrastructure so infrastructure would
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be the major where the infrastructure
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stops sort of the development stops in
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the sense you fake degree I mean that's
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I think that's probably the biggest
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bottleneck as far as the Indian economy
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is concerned the quality and the
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availability of public infrastructure
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that is everyone recognizes that
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as the major challenge even in the major
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Indian cities roads power sewage all our
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follow challenges and aside from
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infrastructure there any other major
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challenges you've received for the
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industry and uh i think you know there's
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one area that needs to be addressed
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which is that the recognition by the
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government of real estate as a as an
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industry which would make things much
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easier the recession ironically has
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actually helped the real estate industry
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in india because it has brought down the
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prices of cement steel and are the
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essential commodities that that go into
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the the construction business i think
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that's that's going to be a key area you
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know what happens to oil prices and what
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happens to the prices of these
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commodities and any thoughts on the
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outlook for 2010 for the industry in
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general well you know I came back from
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mumbai on tuesday and on sunday night i
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was at dinner at a restaurant and i
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actually had someone come up to my table
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and say you know are you guys done
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because we're waiting for a table you
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know that tells you about the state of
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the economy when you're in mumbai you
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feel what recession you know traffic is
00:14:48
is bad people are out buying stuff
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everyone feels very confident the stock
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market is booming companies are lining
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up for IPOs so I'm very very positive as
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far as 2010 is concerned I mean I think
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as long as something doesn't happen on
00:15:03
the international front such as with the
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oil prices I think certainly the
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domestic economy is position very well
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to continue on its path of growth great
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thanks very much be nice to check in
00:15:17
with you again next year thank you thank
00:15:19
you thank you
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you
