Purchasing Power

By Ramesh Akkineni

Unitech's MD Sanjay Chandra in a interview

Why is that you don't participate in hotel auctions?

All our hotels will be a part of a mixed-use development - we don't believe in stand-alone projects. So land agencies auctioning these isolated sites do not fit in with our overall strategy.Besides that, people are paying exorbitant rates that I just don't understand. It doesn't make sense to pay Rs 450 crore (Rs 4.5 billion) for a hotel site in Dwarka. You can make a Ritz Carlton in Singapore for that amount.

Do you perceive a property bubble in the near future?

I think some pockets are heading for trouble. The realty run-up in the tier-II cities in north India are outrunning the employment opportunities available there. And today, all of us developers are chasing the upper middle class.There is all this talk of Ambala, Rudrapur and Haridwar and so on. But how many job opportunities coupled with high purchasing power will actually become a reality in these towns?

What about all the talk of IT/ITES companies starting operations in tier-II cities?

So what? Even if they do, there will still be trouble. These companies will probably have business process outsourcing outfits in these towns and about 90 per cent of the employees won't be able to afford housing. The rest may be supervisors who may have the purchasing power, but 10-15 per cent of them would be living with their parents.Hospitality will be another troubled sector. Those buying sites at exorbitant prices haven't factored in the fact that room rates will fall. A few years from now, the supply will increase considerably, and hotels will no longer be able to command today's room rates.Even retail is heading for trouble. Retailers cannot be expected to make profit from the rentals charged by developers today. Rentals in authorised shopping complexes skyrocketed after the MCD (Municipal Corporation of delhi) sealing drive in the capital. This directly affects the retailer's business.

Is the market in Gurgaon slowing down?

We feel there is an overdose of luxury housing in Gurgaon. So we have made a conscious effort to stay away from that and concentrating on the upper-middle class segment. The average size of our houses is 2,000 square feet and these are available for Rs 80-90 lakh (Rs 8-9 million). Even that is probably too much.

Is there speculation in the market still high?

No, it's much better. From 70 per cent last year, I think, it is down to 10 per cent. Buyers now seem to be selling after possession. This is good news for us in the industry.Earlier a person would buy a house at the time of the launch - with discounts offered which would vary from developer to developer - and sell in just a few months. By the time the construction was completed, a house or apartment had been resold five to 10 times.

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