“We took 10 years to build the Worli-Bandra sea link. The Sewri bridge would be 10 times more important”
For a long time, the only way a member of the middle class could dream of owning a home was to try his luck in the lottery to grab one of those badly-built apartments of the housing board.
Finally, they had one more option—make a beeline for one of the offices of the Housing Development Finance Corporation (HDFC). In a sleazy industry—most builders were out to cheat you and 40% or more of the payment had to be made in cash—HDFC shone as a professional housing finance institution. While it was HT Parekh who pioneered the idea, it was his nephew Deepak Parekh who executed it to perfection, not only growing HDFC but also setting up a bank, a mutual fund, two insurance companies, a securities company and India’s largest real-estate private equity firm along the way.
But Mr Parekh has been more than just a creator of an outstanding, professionally-run organisation. Over the years, he became an indispensable part of the Indian financial world. His wide networking skills made his office one of two or three stops for top global businessmen and officials visiting India. He has been called several times to handle crises, most recently the fraud at Satyam Computer.
He has had the ear of successive ministers and top bureaucrats. You were privileged if you were a member of the FoP (Friend of Parekh) club. After a remarkable innings that lasted 31 years in HDFC, Mr Parekh is now stepping down from an executive role in HDFC. He recently spoke to Moneylife on a variety of issues including his career. One of his thoughts concern what needs to be done for the infrastructure sector so that the pressure of housing in cities like Mumbai can be reduced and the obscene real-estate prices can be brought down.
Here is Mr Parekh in a conversation with Moneylife over housing shortage. These thoughts came out during Moneylife’s conversation with Mr Parekh as part of its Pathbreaker series of interviews. For the full interview, please look out for the next issue of Moneylife.
Moneylife (ML): Over the past few decades, the housing scene has changed, there are many new lenders, yet, many things you have advocated for at least a decade have not happened. For instance, you talked about a housing regulator, sale of flats based on carpet area, clarity on various issues… what are your thoughts on these?
Deepak Parekh (DP): The frustration or disappointment is that real estate and land is a State subject. The bureaucracy and politicians in the State are not in sync with what the people want. Like in Mumbai, what the common man wants is more affordable housing. If any government ensures more affordable housing or more rental housing, or at least makes an attempt to do it, please believe me they will win votes. But somehow, it is not attracting them. And land is such a costly thing with such vested interests that we have not been able to even scratch the surface. A friend of mine approached me a few days ago saying that she has been offered Rs1 lakh a sq foot for her apartment at Breach Candy. Should she take it? It is a 35-year old building with a garden and a swimming pool. I said please do. What are we talking about? At Rs1 lakh a sq foot it is out of the reach of everyone. Even the rich people can't afford these rates.
ML: What are the priorities in urban infrastructure?
DP: I would say that a road or a bridge that connects Mumbai to the mainland (the Sewri- Nhava Sheva link) is far more important than any other. But they make the tender document so difficult and one-sided that nobody bids for it. So you lose years. And this project has been on the drawing board for decades. What do we do? Mumbai does not have enough infrastructure and it is an island.
How can an island grow? An island can grow vertically or you have to reclaim land. But for both, a prerequisite is adequate urban transport, water, sewage and fire-fighting abilities. So unless we do mass urban transport and have new water reservoirs or the other two prerequisites, you can't go high and you can't reclaim. So prices just keep going up. And you don't have an emergency project to link Mumbai to the mainland. That Sewri bridge can really change the city. It will be a 15 to 17 minute bus or car drive and enough land is available there. We took 10 years to build the Worli-Bandra sea link. The Sewri bridge would be 10 times more important than that. We are not doing it.
ML: The scrapping of the Urban Land Ceiling Act has not made things better. Why?
DP: Maharashtra was one of the last States to scrap it. The Act is now scrapped by the Centre and finally also the State. Why was it scrapped here? Because the Centre said that it will not give you any funds under JNNURM (Jawaharlal Nehru National Urban Renewal Mission). Only a carrot-and-stick approach worked. Now, when you scrap an old Act, shouldn't you also say that all the pending cases under the Act are dropped? They have not done that. The cases are continuing even though the Act is scrapped. So no surplus land is available today and no surplus land has come into the market after scrapping ULC. Look at the Godrej land in Vikhroli. They want to build affordable housing there, but it is still under litigation. The government should have said, 'we scrap Urban Land Ceiling Act AND all existing cases under the Act will be dropped'. They haven't said that, so the cases are going on—or rather, the hearings keep getting postponed, nothing happens. Show me one plot of land that has come out of ULC.
The problem is, with us, there is no black and white, there is always grey in every law. Whether it is taxation, excise or the ULC Act. In fact, in this CEO Forum that went to the United States with the prime minister, one of the first issues raised was that we want clarity of laws on taxation and foreign investment. Please tell us ‘yes’ or ‘no’, don't say ‘maybe’ and then we run around trying to find out what is allowed and what is not allowed.
ML: There is no move to set up a housing regulator as yet. Is it because real estate is a State subject?
DP: No. Where there is a will, there is a way. It happened with electricity. How did so many States agree to break the transmission, distribution and generation chain? Initially, only one or two States were willing to do the trifurcation, the rest were not. Again, it happened because the Centre said, if you separate the three functions we will give you the funds under APDRP—the Accelerated Power Development and Reforms Programme. When there is something like that, the States comply, because they want cheaper money or they want grants or something. The same model as in electricity—where you have the Central Electricity Authority and then the State regulators—can be adopted for real estate.
Another area is the lack of uniformity over square footage that is charged to the customer. It doesn't happen anywhere else. What you can do is to charge separately for common amenities like a car park, or swimming pool or a club house, but you can't charge it on per square foot as super built-up and ask customers to pay for an area that they don't get.