India needs skills, technology infusion, meticulous planning and fast execution to spruce up its infrastructure sector, says Sudhir Pai, CEO, Magicbricks.com.
Research indicates a significant shift in infrastructure investment away from Western economies to the Eastern hemisphere. Are India, China and other emerging economies mature enough to handle the sheer incremental volumes of infra projects over the next decade?
As India´s urban population goes up from 26 to 51 per cent in a decade, the need for upgrading urban infrastructure is most acute here. China has caught up in the past six years. Indian infra requirements include budget housing, road infrastructure, bridges, flyovers and underpasses to connect small towns to cities and then to the metros. Most of the housing requirement is in the bottom of the pyramid at the 1 Room Kitchen, 1 BHK, 2 and 3 BHK levels. These are largely in the suburbs and peripheries of cities. While there are plans to connect them, normally transport infrastructure lags real estate development and the roads, flyovers, Metro and BRTS are normally fitted later. With a country spanning 3,287 million sq km, 495 cities with population above 100,000 in 2011, 4,041 statutory towns and 3,894 census towns, the extent of the country and its latent need to bridge the infrastructure gap is $1.5 trillion in the next 10 years as the government intends to connect seven hundred thousand villages with roads by 2019 as part of a massive modernisation plan, according to Finance Minister Arun Jaitley. This also includes airports, ports and logistics corridors and hubs that are in the works.
What is the nature of recalibration needed to ensure ground level deliveries in the sector on parameters of competence, efficiency and financial management to maintain global standards of development?
India needs skills, technology infusion, meticulous planning and fast execution. The rot runs deep and experts have recommended that the first step for a long-term solution is to enforce changes in the education system. A lot of pre-cast technology has been implemented in the heavy infrastructure sector which also needs to be implemented in the budget housing sector to ensure quality, speed of construction and to meet delivery schedules.
With an estimated 500 million people expected to shift from rural settings to urban regions in India over the next 40 years looking for a better quality of life, how can the infra sector maintain a healthy/accelerated pace of professional development?
The biggest requirement is in enabling policies of affordable rental housing to service the migrant populations at different levels. Since this population is extremely mobile and aspirational, they need to be in cities that are safe, well-connected, serviced with food, shopping, entertainment facilities, schools and hospitals. Since Indian city workers normally work through the night to service geographies in North America and Europe, they need effective policing at all times.
A PwC report emphasises the need for a hands-on-approach by CEOs of infrastructure firms in respect of operations as well as data analysis.
Are you as a head honcho running operations able to seamlessly access live, real time information for all capital projects of the organisation in the Indian business sector?
At Magicbricks we believe the only way to ensure transparency in the real estate sector is to make more information available to all at the click of a mouse. To this end we have been mining the data on the back-end and creating usable statistics over the past 10 years. We have now completed five years of the our 11-city, locality-based Property Index, ´Propindex´. This forms an amazing body of information for consumers, industry and the lenders to use about value movements and consumer demand during different economic cycles.
When we started 10 years ago, online search for property was a small fraction. Today KPMG estimates that 76 per cent of consumers start their property search online. It makes it easy for them to discover, compare and discover benchmark prices to compare the cost of their chosen property with.
Similarly, we have created an advice section where we allow consumers to use various data-driven tools to make their property decisions, identify the right property and check how their investments have performed. We constantly assess how our financial investments have performed. At Magicbricks we are working towards a scenario where you will be able to assess the value of your property investments as well.
´Propworth´ is a tool that allows you to feed basic data about your property to assess what its net worth is currently. In a scenario where consumers are investing for gain, these tools are very important. In addition we have acqui-hired Bengaluru-based Properji to make well-researched reports on real estate projects which allows the consumer to make an informed choice.
Similarly, developers have also started allocating larger and larger share of marketing bucks to online advertising. Today it is a healthy 10-25 per cent of the total marketing spend. After all, if the consumer has shifted online, so should the developer and projects.
Is there adequate digital competence and applications ability to move from the mindset existing today, to make this vision a real probability?
Think about how much time each of us spend online. A large part of it in Urban India is on the phone. Statistics show that at least 60 per cent of the traffic on Magicbricks comes from the handheld device, largely mobile phones. As a result the maximum traction will be from services and tools that are synced with mobile screens. The agenda does not need to be pushed. Consumers are online and their solutions also need to be there for ease of use.
A lower interest regime and focus on capital and commodities markets has been espoused by PM Modi for creating infrastructure finance. How can this be done without adversely impacting the infrastructure business, as the recent demonetisation has done by bringing the entire cash-based transactions (transportation, contract workers) to a halt?
We believe that the demonetisation move, even though with a slightly faulty implementation, has levelled the playing field for the entire housing sector. Earlier there was one social sector agenda that was based on doles and there was a middle and premium sector that was based on formal finance.
Now that the cashless economy has become the new normal, the ´Housing for All´ agenda can be achieved so much easier.
At Magicbricks we have explored various options and found that with a little retargeting we have managed to migrate the budget housing category also to shift online. Today 73-75 per cent online consumers search for properties that cost less than Rs 40 lakh and cost less than Rs 15,000 for rent.
Young Urban India is on the move and so are their transactions. Now that all transactions are digital, the push to seek the house, seek professional advice, get rent agreements made and finally pay rents online can all be seamlessly closed. They can also apply for housing subsidies and get that delivered to their bank accounts online as well. We expect this to become the new normal.
As far as ´Housing for All´ goes, consumers can compare loans, search for homes with pre-approved lender backing and study trends including future predictions. We expect the entire home search to move online sooner than later.
What are your expectations based on industry talk from the forthcoming Union Budget for the 2017-2018 fiscal year? What would you like to place on the infra industry wish-list for a positive fallout on the sector?
We believe that the government´s aim will be to bring more transparency into the sector with more and more parts of the home buying process shifting to online mediums for transparency, efficiency and effectiveness. Affordable and budget housing will be a thrust in terms of incentives for the private sector to build them, the informal and formal sector employees to get better access to home finance at lower rates and the infrastructure to keep pace with development to provide seamless access to peripheral locations where affordable housing units can come up. Taxation levels are expected to come down as also home loan interest rates. All this will ensure that the consumer will move online to check on project approvals, estimated completion schedules, stages of construction, development of locality and project vis-a-vis competition and finally even sourcing home loans. This can truly become the start of Digital India going digital.