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Regulations are not going to solve real estate problems: Arun Nanda, Mahindra Lifespace

There are some bad people in the industry who have exploited things, but that doesn’t mean that you paint everybody with the same brush.

ET Now|
Updated: Jun 05, 2013, 02.18 PM IST
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There are some bad people in the industry who have exploited things, but that doesn’t mean that you paint everybody with the same brush, says Arun Nanda
There are some bad people in the industry who have exploited things, but that doesn’t mean that you paint everybody with the same brush, says Arun Nanda
In an interview with ET Now, Arun Nanda, Chairman, Mahindra Lifespace, talks about the real estate regulator bill and how it will impact the sector. Excerpts:

ET Now: A regulator is not great news for the sector. What is your view?

Arun Nanda: It looks that we will have more compliance officers on our team than construction engineers.

ET Now: Do you think nothing will change for the sector?

Arun Nanda: In any industry there are some 'not so good' people or people who do not have good ethics. However, that doesn’t mean that we bring everybody down into this situation. This is probably the most regulated industry. We are an over governed economy and we are getting more and more into that situation. This is a sector which probably employs the maximum number of people. There is a shortage of 22 million homes.

I do concede that there are some bad people in the industry who have exploited things, but that doesn’t mean that you paint everybody with the same brush. It is a highly capital-intensive industry and if 70% of our sale proceeds have to put into a separate bank account where the land cost is 60%-70% of the project cost, it is just stifling the industry.

ET Now: Do you think there should be only one way to sell real estate in India?

Arun Nanda: This is a super built up area and this is a carpet area. Under the Maharashtra laws, we have to mention the carpet area on the contract. It is builders like us who are able to sell during construction. Today people do not trust the small builders and they are not able to sell during construction. They only sell completed projects.

Therefore, the customer is very wise and 90% plus buyers are taking bank loans or housing finance loans and housing finance companies do not give approvals unless it is an approved project. I am a little worried that we will have more compliance officers sitting in our office rather than people looking at designing or building projects.

ET Now: Would funding become an issue?

Arun Nanda: Funding is not an issue because it is under the RBI regulation that you cannot get loan against purchase of land. Loan is given only for construction finance. In South Bombay where a property sells for Rs 80,000, the land cost is around Rs 50,000 a sq ft. If we have to put that money in the bank, how will the developers get money? We are a free economy and so why do we pay a premium for a good product compared to a bad product?

Thanks to the media and RTI, people know how to buy a good thing. Therefore, regulations are not going to solve problems. The bad boys will find some way to manage that situation and the problem rests with people like Prestige and Mahindra who have to have one more set of people running around to get approvals and keep records.

ET Now: Do you not think that this has happened because we have seen so many cases of illegal constructions, inventory hoarding to raise prices of properties and promises not being met?

Arun Nanda: It happens in all industries, but there are intelligent buyers. The media never says that a Prestige or a Mahindra customer was happy. That is not news for you. Therefore, when we are selling millions of sq ft to thousands of buyers, we do not have complaints and there are issues to do it, but media does not write that. Media only writes what is bad news. But the bad news is only a fraction of the good news.

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