CHENNAI: Large gated communities are the future of residential real estate, says S. Vasudevan, CMD of Bangalore based-developer, Ozone Group.
The nine-year-old company has delivered around 4 million sq ft of residential and commercial space. Ozone has townships under construction in Chennai and Bangalore and an upcoming island project in Goa. Excerpts from an interview:
How is demand for your projects shaping, with everyone talking about poor buyer sentiment for property purchases?
We have not faced any demand issues in our Chennai and Bangalore developments.
I think slow absorption in some projects was driven primarily due to high prices. If the price is right and the product offers the desired features, it will sell well.
'For instance our city-centric development in Chennai, Metrozone, was launched in 2009 at a price of Rs 5,000 per sq ft.
We have been increasing prices based on milestones achieved. Out of the 1,800 units planned, we have sold 1,400 and sales have been steady month-on-month.
The sale price is now at Rs 10,000 per sq ft.
Which segments of residential real estate appear most promising?
The future is certainly in large gated townships, in the place of standalone developments. Everyone desires amenities such as a club house and gym.
Also, there is greater awareness and emphasis on outdoor activities such as walking and cycling. Those living in independent houses feel their kids have no access to safe open spaces.
All of these are possible only in large-scale developments. There is already a shift in this direction.
Given your focus on large township development, how would the new Land Acquisition bill affect you?
The Bill will certainly slow down large developments. If we are able to find private deals, where a single owner has sizeable land parcels, there is no issue as the government is not involved.
But it is not easy to find large chunks of land as there are usually government revenue lands / grant lands holdings in between private lands.
The Bill has made acquiring land nearly impossible for private companies. Public-private partnerships, where the government supplies land and we do the development, may be one way to go.
What is your take on RBI’s ban on 80:20 schemes?
I think the RBI made a hasty move. Their rationale was to reduce the risk to buyers when builders get the money upfront, but do not use the funds for the project development.
A proper escrow mechanism could have been created to see that these funds were properly utilised.
However, only builders with a good track record were offered this scheme by banks, so the risks were quite low.
The adverse impact of the ban will most likely be felt by those who sell to investors. We sell primarily to end-users and do not encourage pre-launch, sales etc.
The ban’s impact on us is very minuscule; out of the 1,400 units sold in Chennai, only five buyers opted for the scheme.
What are your expansion plans?
We plan to develop 6 million sq ft over the next 2-5 years with our existing land banks in Chennai, Bangalore and Goa (in an island along the Mandovi river).
We plan to stick to these cities and do not plan to expand outside.
I think real estate is a very local business and there are many regional variations in user expectations and approval process. We have to understand the pulse of these markets. And as these markets have a lot of depth, it should keep us busy for the next several years.