Vikram Goel, CEO, HDFC Realty
Having pioneered the concept of home loans in India, in 1987, HDFC spotted an opportunity of servicing the clients - advising them on their real estate requirements in the unorganised market. This led to the formation of HDFC' Property Services Group. Over the years, economic development, changing government policies and corporatisation of the real estate market, was another opportunity tapped by HDFC - to offer advisory services to not just the corporate sector but institutions as well. Vikram Goel, CEO and Amit Joshi-Marketing Head and Regional Manager, Commercial-West, HDFC Realty, highlight the advantages and functions of a real estate advisory to MONISHA RAO.
HDFC Realty conducts residential transactions worth over Rs 2,500 crore per year. To what do you attribute this growth?
Joshi: HDFC Realty' focus has primarily been on HDFC' home loan customers. Over the years, our operations have grown to more than 22 Tier-I, Tier-II and Tier-III cities. We have grown both in terms of the number of cities of operations and number of transactions we conduct per year. Our continued focus on the end customer, national footprint along with favourable market conditions have been the key attributors to this growth.
Having shifted from a captive to market institution, what is the ratio of your residential and commercial transactions?
Goel: Our transactions have been growing at a healthy percentage year-on-year. Initially, HDFC Realty only focused on the residential segment; however, today we are present in almost all sections of the real estate sector covering commercial office spaces, retail services, land advisory, consulting and valuations, and capital markets. While our focus continues to remain on residential - a sustainable market - the commercial and retail segments is of equal importance. A few years back, when we expanded into non-residential verticals, our residential percentage was around 80 per cent of the total business. But in coming years, we expect that ratio to be 50:50.
How does HDFC Realty have an edge over the increasing number of bank subsidiaries entering the real estate sector?
Goel: While most other banks have entered the real estate market with a focus on providing a service as part of the portfolio management of High Networth Individual (HNI) clients, HDFC did so because it gelled with its home loan business. It is more broad-based because of the number of home loan customers that is exponentially higher than the HNI customers. However, though we have been around for 14 years in the sector with a presence in 22 cities today, we are nowhere close to exploring the true potential that the market offers.
Joshi: Our biggest strength is our neighbourhood knowledge and the relationship we share with the developers in the market. This makes it easier for us to advise customers on various deals. We have a list of projects that have been sanctioned for HDFC home loans and this helps us in our forward integration. Also, we prefer giving holistic advice by which we aim to avoid giving advice when a consumer merely wants to invest.
Who are the developers you work with ?
Joshi: We deal with almost all the known developers. You name the top 10 developers in the country, they are our clients and so will be true for most cities in India.
Goel: We are in touch with over 800 developers across the country. This covers 80-85 per cent of the total relevant real-estate market in India. To name a few: DLF, Unitech, Raheja, Kalpataru, Rustomjee, Godrej, Tata, Mahindra, Puravankara, Brigade, Prestige and Lodha. We have known most of these developers for over 20-30 years and thus it is not just the number of relationships we have but also the quality of these relationships.
Highlight the current demand-supply scenario in the real estate sector?
Goel: In India, over the past 20-25 years, buying a house has become more affordable. For instance, 25 years back, people spent about 20 times of their annual CTC to buy a house as compared to today, where this has reduced by four to five times. Thus, affordability has gone up. Second, with urbanisation, people are not only coming to cities, cities are also expanding and going into the peripheral areas. For example, 10 years back, you would not talk about Boisar as an option in the Mumbai suburb, but now you do. Third, the country has a huge demographic advantage where over 50 per cent of the population is under 30 years of age. Various estimates put the total shortage at around 20-25 million dwelling units. Hence, there is a huge demand to cater to.
However, there could be an oversupply and saturation in certain micro markets. For instance, 'X' location may need 5,000 units over the next two to three years but in anticipation of an airport or a national highway or metro facility, 8,000 units are being constructed. Moreover, while there is a lot of activity and under construction units in Noida, the supply of ready flats is still limited. Hence, while calculating the inventory in a particular area, one also has to look at when it will be delivered in the market for occupation. Despite the fact that in certain micro markets there is a mismatch, broadly considering overall growth, we still have a long way to go.
What impact do rising real estate prices have on your business?
Joshi: Rising real estate prices do affect the real estate sector as it is a sentiment-driven market. When the sentiments are low, velocity of sales volume may or may not drop depending on various other factors. The graph of sales volume of inventories may have suffered a little; however, a situational oversupply does not mean there is no demand.
If you consider a particular project in the month of January 2014 and go back to the same project in June 2014, chances of the rates decreasing are minimal. Keeping this in mind, we advise our customers in a manner we think is best suited for them to buy a property.
Where do you see HDFC Realty in the next five years?
Goel: Housing as a market will exist for over 100 years. While the micro market in the sector experiences seasonality in an interval of five to six years, the sale of real estate in the country never stops. Considering positive GDP growth coupled with a reputed brand like HDFC, the opportunities in the real estate market are huge. With the way we have been growing for the past four years, we are very positive that we will reach a different horizon altogether. We have a very strong platform in a pan-India market. Overall, our business could grow exponentially in the next five years.
Year of Establishment: 2000
Top management: Board of directors: Manoj Nair, Sunil Shaligram, M Rambhadran, Naresh Nadkarni.
No. of employees: 290
Centre(s) of operation: More than 22 cities pan-India
Clients: Over 800 developers
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