(ML): How do you see the real-estate industry after the slowdown?
Vijay Wadhwa (VW): After the slowdown, the correction in prices in good locations helped to kick off sales. As the situation improved, developers slowly increased the prices of the properties by 10%-15% to cover their losses. But a few of them spiked up the prices over 25% due to which they failed to report good sales figures.
ML: What did you learn during the slowdown? How did the Indian realty market face it?
(VW): There are three main elements that are affected in a downturn—supply, demand and prices. If any one of these elements goes awry, the industry slows down. As As the slowdown entered India, we decreased our property prices, and properties in good locations reported sales due to reduced prices.
ML: How did you survive in the recession?
(VW): We met our suppliers and contractors to work out a solution to the slowdown. We negotiated so that we had to pay only the labour charges upfront. At some sites, we slowed down our work a bit but did not stop it. The next thing we did was to asses our existing asset portfolio carefully. For example, we owned a club at Borivali (a Mumbai suburb). In January 2009, we demolished the club and launched ‘Aquaria Grande’, a residential project.
ML: Affordable housing was the trend during the slowdown and now the industry is looking at constructing high-end flats. Why did the affordable home segment vanish?
VW: In Mumbai, developers started affordable housing because they had to survive on cash flow during the recession. However, affordable housing in this city cannot be sustained because the land itself is very expensive. Many developers started selling properties in peripheral areas of Mumbai at Rs1,800 to Rs2,000 per square feet. If one is building a 22-storey building and if we consider the cost of construction, municipal taxes and architect’s fees—excluding the land cost—the cost of development won’t be less than Rs1,800 per square feet. Developers thought that they would average the losses with sale of other projects. But as the industry started reviving, they increased the prices of the same properties between 15%-20%.
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