WFH temporary, realty will grow exponentially long term: Niranjan Hiranandani

While the pandemic caused a giant leap in the way people work with WFH becoming standard protocol of following covid appropriate behaviour world over for almost 18 months now, Niranjan Hiranandani, co-founder and managing director of real estate giant Hiranandani Group however expressed optimism that growth of 10% GDP will lead to a rise in requirement for commercial space.

In a dialogue with Kailashnath Adhikari, during the webcast of the Visionary Talk series held by the public policy and governance analysis platform, Hiranandani said that with a lot of people being comfortable with WFH, many would want to continue to do so provided the company is satisfied that WFH operation is efficient.

For the company, he said there will be certain advantages that they don’t need office space to the extent people work from home. "But you cannot monitor people as much as you want to besides other factors like interconnecting with people and bringing up companies. They find it extremely difficult to say there will be bonhomie and a part of the time when you physically working together. I don’t think there will really be a WFH that will be 100% paradigm. Provided the companies are comfortable 10%-15% people will be able to WFH and commercial space may see a downturn of 10%-15% and rest will come back.”

On the other side, he said that unlike earlier, when people would be cramped up in offices like packs of sardines, today that has changed. Social distancing, lesser no of people per sqft and with more room available, going forward there could also be multiple hub and spoke offices within a city centre as not many people have enough space to WFH and are very uncomfortable.

To illustrate his point he said at Hiranandani in the next 2-3 years, the group will add 3 million sq ft of commercial space in the Mumbai region alone. “We are heavily committed to the fact that in the next couple of years India will grow, GDP will grow, commercial space requirement will grow and especially the need for A grade offices will grow much more than anticipated. Corporate entities; both Indian and multinational as well as IT sector require office and commercial space’’ he said.

He added that the pandemic led people to start valuing their homes as earlier they never got to spend so much time at home. “Today having been stuck at home for more than 15 months they want better quality homes with amenities and surroundings and this has led to a spurt in demand for housing in both affordable and premium. With Covid, the requirement of the value of having a good home quality home in affordable as well as premium sections.”

Responding to a query on a huge amount of completed and unsold inventory on one hand and partly constructed and abandoned inventory, on the other hand, spoiling the skyline of Mumbai city, Hiranandani attributed the troubled state of affairs to a mismatch between user’s needs and the actual product in terms of price or size.

He said even though many people can afford a house if it is affordably priced, there is a mismatch between supply and demand and that is one of the reasons due to which this scenario has happened. Flats that were ready and did not have a mismatch got sold within this period.

Secondly, he said, where housing has a mismatch with infrastructure or price point or the size of tenements do not meet the demands of the market place you will have problems. When Parel area with many large mills and other properties started redeveloping, unfortunately, no good infrastructure came up in that area in terms of roads railways. ‘‘When you don’t develop infrastructure pari passu with development of housing then there is a problem. Housing cannot be developed in isolation. It needs water, roads, police station, hospital, education centre, gardens and all supporting infrastructure.”

Lastly, he said, “projects got stuck due to mismatch in funding, financing and other issues which have become complicated since demonetization took place. Subsequently, ILFS went into disaster, there were problems with GST and with RERA coming in… and all these things coming one after the other many companies went into NCLT and had problems in the marketplace. NBFCs like ILFS had to stop funding as it went into liquidation .. all these complications created problems of incomplete buildings and construction problems... all sort of complications continue to rule the roost.”

While giving his views on real estate investment trusts (REIT’S) and infrastructure investment trusts (InvITs) in real estate, Hiranandani said they are safe investments, give good dividends over a period of time, give opportunity for capital appreciation. “REIT’s will continue to be very good investments.”

InvIT’s he said would be a hundred times larger than REIT’s and provide bigger investment opportunities in the next five years and even match REIT’s over a period of time. Both instruments are very sophisticated.