Wednesday, April 22, 2020

Fasten Your Seat Belts & Gear Up; Real Estate!

“I won’t borrow light from moon but the courage to fight with the darkness”...

Well, just the way  Munshiji alias Omprakash says to Vikki Kapoor alias Bachhan in epic movie Sharabi, “shayari me wajan chahiye to ishque hona jaruri hai, barkhurdar”, same way for philosophy its suffering which plays major role for “wajan” i.e. death, lol, a self derived logic again(needless to say lockdown is the cause)! Well, every day of lockdown is becoming virtually happening as nothing happens in actual but zoom meetings, duo calls, whatsap group charcha, all are in full form. And there is something new (I mean created) as so much chaos around especially when real estate is the case, its bound to be as why this virus thing, whenever it’s any of problem which isn’t in control of govt or society; may it be less rains may it be flood may it be illegal construction or may it be Metro FSI/TRD/TOD whatever you call it (what the difference it makes anyways), it’s always the real estate which takes the blame & impact. Then real estate is a industry which is like an orphan (no “mai baap”) & here, work from home is not possible for most of the associated segments; well unless we start building virtual homes & ask people to live in them virtually & then get paid by Bit-coin!

Sarcastic, I am, but then that’s the scene as first the govt says you can start site work on 20th April, though not sure how yet it announced & then on the eve of 19th April govt (PMC,PCMC, Collector, Hon Dy CM& everybody) says nothing is allowed in PMC/PCMC (well may be in other areas allowed but I am concerned with this) i.e. Pune region. Well even its been announced that property registrations (read as flats”) also will be started on 20th April, god knows who is allowed to go out for registration & how & most importantly why someone will dare in first place with such terror & confusion on media as well govt itself with its policies! So as usual all we can do is discuss & re-discuss about fate of real estate. No doubt despite efforts of every authority, scene in Pune region is bad than other areas of State on front of epidemic spread but we can’t ignore the other side of the curtain also which makes Pune & Mumbai most densely populated region with half of the Maharashtra (and many other State too) living in this region for their jobs & careers is a fact! And then with all due respect (plz do mind) I really wonder who is controller of the situation in Pune city, as Police has their own circulars, so has Municipal Commissioners’ of PMC & PCMC, then Collector has its own orders & on top of it Mai Baap govt which includes CM, Dy CM & whomsoever, have their own dosage of announcements regarding new restrictions, lifting or tightening! And joke is by my logical mind, if this is disaster caused by epidemic of a disease so the Public Health Dept must be controller & all other depts should follow what the concerned minister says which happened to be a Doctor also. But fact is except public health all other depts are running their own agendas with zero coordination, that’s main disaster actually! Sorry guys (read as authorities) but to the common man that seems the scene in this region at least, I don’t want to take away credit for your efforts (read as govts’) sure!

Any ways so by now more stringent restrictions on movements in Pune reigion for till April end are supposed to be there (don’t ask means what), I only wonder about how to control the labours at site which are cramped inside hutments in more than 40 degrees temperature outside & nothing to do! I repeat, I fully understand graveness of spread of virus yet at the same time pressure is mounting in lower class (in real estate as well other industries) is also a fact we can’t neglect, is what I am pointing at!

Well, on all such back grounds silver line is younger genre working with me is curious (worried also) about their future journey in real estate & my cousin’s son along with my younger son (mkt guy) too, working with me as an engineer sent me a mail with a ten pointer questioner regarding scene in our company as well entire real estate & social front. I am happy as if you don’t have questions, then that means two of the things, either you are too dumb or you have attained wisdom! But if you have questions & you dare to ask them means your journey towards wisdom is on i.e. you are surely not a dumb!  I  wrote him back saying I will try to answer as much I can as first I am an engineer, planner but less of a businessman by myself & second this is something which not even the best among us has faced, so I am not sure about my own right or wrong. Yet I replied with my logic & sharing the same which can be somewhat useful (I hope) for not just builders, their staff or real estate related entities but entire industry world (especially genre next in business) as well many of us. I have deliberately kept the draft as what I answered just to keep naturalness of the conversation as his questions reflects his freshness & they are regarding the project he is working on yet its applicable to most sites (as well most builders), so here we go...

On Tue, Apr 14, 2020 at 4:50 PM Rohit Mahajan wrote:

Kaka, These are few issues about which i would like to know from your point of view.

1. How do we plan to get the whole construction work back on track for prestige avenue keeping in mind that we have lost quite a bit of time and the coming months will be of monsoon season after the whole lockdown is lifted.

Frankly it’s too early to comment as we don’t know what they decide about Pune & transport of materials thing, so wait till 20th April orders. As even if they lift the restriction yet how the outside materials will reach to site as the supply chain will take its time to resume. And then we also have to take infection threat which will be still there, in our consideration keeping in mind safety of staff as well labours. So, I think best way is waiting till 3rd May i.e. lockdown period over & take a review & then decide course of action. We will be writing to clients about the same as well authorities like RERA & our bankers regarding this.

2. We still don’t know or have any idea about the future developments regarding the situation of COVID-19 (in the worst case scenario for how long will we continue with the payment of salaries of the people working at the firm)

I am working at it as its going to be difficult sure with no revenues & people also should understand that no company can pay full when you are sitting at home for nearly 50 days! As expenses of the staff also must be less during this period like petrol & entertainment etc. That they should consider keeping in mind companies loss, this we will have to explain the staff by speaking to them across, which I will. 

3. Once the whole lockdown is lifted how we plan on notifying RERA about the delay and how realistic will their approach be towards it keeping in mind that all the construction firms with ongoing projects will apply for the same. Does CREDAI as a body have any plans for this upcoming situation?

Credai is a social body & they can advise or guide which they will. RERA has already allowed three months delay but the impact will be much more than that. But yes we are trying to make authorities know the facts & follow for policies on all fronts keeping in mind these facts!

4. Similarly how do we plan on tackling the situation from customer’s perspective?

Difficult aspect is selling flats here after as people are afraid of their own future & they may think of renting & investors will be there but they will make you cry (bleed ) for price we ask! We have to balance both & come up with innovative ideas to make people buy homes, is the only way! As well take existing customers also in confidence.

5. In this whole situation how are we handling the bank and their expectations as in the project finance, loans, interests etc.

Speaking personal level at present we have only one project loan (fortunately) that too Prestige site & its way below the sale inventory & we have asked them for weaver for three months which can be expected to extend by three more month. Best way is we try generating our finance for completing the project as fast we can. But govt will have to think about this aspect as well I too am thinking but my problem is I am too bad at finance & will take help of some real brain on that front! But for the developers with multiple projects, keeping cash flow & repayment of finance as well new money to complete to site works is going to be main challenge sure. Here the contractors & vendors also must accept to wait a bit for their payments as then only all will gain something.

6. Is increasing the costs of the product the only way to make up for the amounts lost during this period of time? If there are any other options to do so please let me know. 

Construction costs are going to get increase but not the sale rates & that’s the worst aspect of this disaster for real estate as well every other industry. We have to cut down on overheads as much we can & renegotiate with vendors as well contractors as they too have to face the heat!

7. Getting people back for work is going to be a big task and with this strict time frame to finish the whole work probably they are going to ask for increased wages so what do we plan on doing if that happens.

Its a two way sword as the labours as well contractors & vendors too need the work or they will starve to death, either here or way back their homes where they don’t have any jobs. This is what we need to make them explain at least we can try! 

8. Costs, salary, overheads and many more things need to be cut down on as to sustain in this market at this time; your views on this.

One should make proper assessment of all aspects of respective project & business & then act up on instead jumping on conclusions or else there will be unnecessary panic! That’s what I will be doing & you also have to follow same course. 

9. Real estate prices are estimated to go down by at least 20% if that happens what and how do you propose for the future development plans.

Real estate prices will go down is outcome of opinions of any disaster may it be epidemic or war or any financial crisis. So instead listening to such talks, we should try to judge exactly in what cost we can build & what price we can sale & what is need of the buyer & stick to that. Any person who hasn’t borrowed over the head i.e. heavily need not be afraid but stand firm & keep patience. There will be buyers for the homes, as all these people who has run away from the Pune will have to come back as they are not going to get jobs or life style they are used to have in their respective home towns is a fact. And when they come back they also will have to work at lower salaries is a fact! We need to make home buyers (well, means who doesn’t have their own home) aware about importance of owning a home as that’s best asset as well support in such times actually.

10. Lastly if there is any other thing that you think I should go through/read, please let me know. 

In these times patience is the key & a balance head as well we should think of other sources of income as just real estate won’t be an option or even having some industrial unit only. The service industry will be in good shape as people can’t live without their basic needs, so we should identify such sectors & try to look at them as parallel avenues. At the same time the home buyer will also focus on basic necessary amenities than spending luxurious specifications as hereafter for everybody every single rupee will count At least for two three years & then again things will be  back on normal as public memory is short always! But your genre must be ready for such global level social disaster as this may be first of its kind but surely won’t be last, mind it! In a way this may be a life changing episode for most of us if at all we take it as a lesson as right from attitude towards life to needs of life, many things are going to change & so has to real estate industry!

I think I have tried whatever best I can logically explain or answer your quarries, more at across; rather I will suggest you & rohan do share  this with our team on whatsap  also as they too also should know the scene ahead. I am happy you have thought a lot about work, as sure the future won’t be what we have predicted hereafter but then that’s why it’s called a future! One thing is sure for your genre must learn one lesson from this covid episode, which most of you guys have forgotten; there is only one option for the hard work & that is, more hard work! Adios with that! 

sanjay kaka
Sanjay Deshpande 
Sanjeevani Dev.

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