Vision of Life; by Sanjay

Sunday, March 8, 2015

Union Budget & Dream of Affordable Home!

A budget tells us what we can't afford, but it doesn't keep us from buying it…William Feather

William A. Feather was an American publisher and author, after earning a degree in economics; he began working as a reporter for the Cleveland Press. In 1916, he established the William Feather Magazine. In addition to writing for and publishing that magazine, and writing for other magazines, he ran a successful printing business, and wrote several books. The quote indicates his authority on the subject he has earned a degree as well as an author too! While the country is yet to come out from the usual discussions about the financial budget this quote I feel best to start the sharing. Every year we get budget & as usual celebrities reactions cum comments about the same. Every year the faces, names also are same to whom similar questions are asked & even the reactions are also same. Never have I remembered that someone has said excellent budget & it’s going to change the fate of a particular business & analysis of why so! May it be real estate or automobile or white goods, no one are ever happy with the budget. There was a joke on whatsapp which recently is like a face of the society, saying “It’s only the drunkards & manufacturers of alcohol are the people who accept any budget without any complaints, despite the fact each new budget is loaded with added burden of taxes on the product!” Joke it may be yet it speaks about the budget outcome; as no industry is ever happy with what they get in budget, is what common man in me thinks when he read all the usual post budget tamasha!

Agreed no one, even the Gods can make all the people happy at a time, & especially when the people are our beloved Indian lot, yet some where fact remains how can no segment is happy with the budget & why? I always like to read the reactions of the common man rather so called common man about the budget as I wonder how many actually understands the terminology & the figures reveled in the budget. Why can’t it be a simpler & free of terms like surcharge & repo rate etc? Why it can’t straight away speaks about what type of discounts a person will be getting when he will go & buy a particular product? Why the budget is always in code language of an economist which no sane common man can understand even with his common sense? Leave apart a common man, even a common businessman like me also don’t understand what my business has gained or lost due to the new budget, such are the budget presentations. Agreed I don’t expect something like simple new read but then just as a thought white paper like thing can be also prepared along with the main budget document which will put the basics of the budget in a language which common man will understand! Till that happen we all have to depend on media or the so called experts to know what pinch or smile the budget has given us or the best way is waiting till actual effect happens to the prices of the products we buy!

For now put such dreams aside & let’s see what the budget has given to real estate; here real estate means keeping the end user in mind who is a simple home buyer from middle class, is what I mean! Many as usual will say why to give relaxation in taxes or anything to real estate as builders & all related to that business has enough of money, so let’s understand, real estate isn’t some bunch of so called Ray ban goggle & gold chain wearing guys but it’s the end product which we should think of! And with all due respect I as a common man plus builder found nothing at least that’s what my prima fascia understanding is from what I read about the budget. Though it’s too early to comment as many corporate bosses have said its very good & long term planned budget & that’s has been reflected on share market the way it has reacted with high tide. But then does really share market can represent ground situation in any particular market is what I always want to ask. And sadly at least the real estate in Pune the scene is all together reverse than what is being seen in share market. The land rates are still sky rocketing & flats rates whatever they may be there is no taker is the scene which not many will acknowledge but off the record yes! May it be a thousand flats town ship or small single standing building all the developers are bleeding & the biggest joke is even the clients still are blaming the real estate industry for high prices of homes! Everyone is speaking about affordable homes but no one knows where they are?
It’s this subject which hasn’t been touched by the budget is what I feel. The Hon Prime Minister has earlier mentioned about prioritizing housing that too housing for all segments of the society so the expectations were real high from the budget but seems PM has different plans as not a single special policy has been announced which will lead the way to make houses affordable & that too the end buyer if not developers! For e.g. when we want to make any product of a particular industry affordable means a bit cheaper or easily available then the first thing it should get reflect in its taxation mode & second is making easier as well cheaper finance available to buy that product! Both things haven’t been happened on real estate front in the budget at least no one has said that it’s been done in this way.

Few years back there was income tax scheme by name 80IB which assured no income tax for the projects which have a certain sizes of flats as well the land size should be more that one acre i.e. nearly 44,000sft. This scheme was abandoned suddenly the way it has started. Again though I am no expert on such matters but by me there were many lacunas in the 80IB & the biggest was no system was in place to assure that whatever benefit the developer has been given by charging no income tax has been passed on to the end buyer of the homes neither any such benefit the other segments related to the real estate got via this scheme! As in real estate it’s a myth & some what extent a truth, that only land lords & the builders earn rest all just run! And this is where the 80 IB scheme lacked most in achieving its success of making the homes affordable! By me that was the last attempt made to homes affordable to all segments of the society as then after no govt came up with any scheme which was aimed to assist real estate & its segments!

I don’t know what is corporate tax but seems it has been reduced & that too by one percent for each coming years, in gross five percent. Well, how many corporate companies are there in real estate? Rather the industry lacks corporates' & most players are local as well partnership firms, so I doubt reduction in corporate tax will do any good for real estate. Then come the famous capital gain tax which hasn’t been touched again, keeping investors away from the market. For those who are not aware of capital gain tax, well land or home must be the only product where this tax is applicable. It means govt decides how much profit you should earn in buying & selling of a real estate property, residential more precise. In no other industry this is applicable as how much money I should make must be left to market & why govt needs a cut from that profit I always wonder? Again the profit which you have earned from selling your flat which should be at least three year old to avail capital gain provision. So this money you have to put in other property or bonds which gets locked for three years at very cheap interest rate! This is something we need to work on if we want more investors to come in real estate. I myself don’t know if this is good for end users as investor seeking only profit may again damaging to target of affordable homes but at the same time every industry needs investors for growing is a fact. So there has to be a tax structure which will balance between end user as well investors, which apparently hasn’t been done.

Another aspect is making cheaper rate finance available to the real estate developers, as even if you are building a five star luxury resort then also you get red carpet treatment from banks & soft loans but no such thing for a builder! Here in first place you don’t get finance to buy land which is major investment in itself & then real estate is a non priority segment means have to avail loans at highest interest rate! There are loans available for a flat holder at mere eleven percent & up to eight percent of deal value but at the same time developer has to pay as high as eighteen percent & more than that to private financers for land, so ultimately making the end product burdened with all the high interest rates! This simple math a non banker like me can understand but not our finance minister!

There wasn’t any policy for construction material’s rates or any special facility for their production. Every year right from cement too steel to sand, all rates are hiked by the manufacturers as govt seems to have no say in it. Also the service tax has gone up means every service of consultants like lawyer, architect & structural designer & many so has become costly. Why they can’t reduce service tax for professionals related to affordable housing but for that govt has to define what is affordable which they haven’t bothered to do!

Our Hon PM speaks highly about use of unconventional source of energy & its use to be promoted in housing but on this front also the budget is silent. Where we lack in eco housing is at R & D; and on this front budget could have made provisions for setting up R & D institutes on the line of National Chemical Laboratory type establishment in form of National Environmental Research Lab! As we need to find our replacement for age old construction techniques involving huge natural resources like sand & khadi, which are creating lots of problem to the environment such as river bed erosion or hill/ mountain cutting. And for that in depth study of alternate materials as well construction practices is a must, which we are not having anywhere in the country expect TERI, to some extent! At the same time if we want to promote solar energy in homes then these products should be subsidized & that effect of energy saving has to be given while calculation use of conventional electric energy. A nationwide common policy has to be made for this which is missing right now. Also procedural delays in obtaining hundreds of NOC’s for building a building has to be streamlined. Every city takes its own time in very basic thing like making development plans; this has to be time bound or else applying financial charges to the civic body by state or central govt. At the same time efficient programming of DP’s should be rewarded by financial prizes to the civic bodies so they will be on their own get such planning things done in time.
For making affordable homes the most important front is infrastructure of any urban development & a separate fund has to be created here as well schemes to attract more investors in this segment. As no home can be affordable if there isn’t any proper transportation, water, power, drainage, education, public health like facilities around the home. And on this front every city & town lacks very much. Even in Pune if we have a holistic look then what we see? The villages which have been merged or to be merged in Pune Corporation have town ships mushrooming all over but without any of above infrastructure. Under the name of affordable housing we are making concrete slums & govt seems to turn blind eye on this front!

People are buying homes despite the poorest infrastructure because they are helpless & in need of a shelter. Millions don’t have their own home is a fact & they adjust with whatever comes in their budget without complaint but is it a good governance? It’s high time the real estate industry should ask themselves about their role rather responsibility is proper word in making a budget of a country where most of the population either lives in slums or in fields. This year is gone for the budget part, but there is next year ahead & if we the people in real estate don’t think & act for our clients then like the famous “Shaikhchillie’, who cut the branch of tree he was sitting, we all will end up same way. And do mind our fall will be from such a height that our recovery will be impossible!

Sanjay Deshpande

Sanjeevani Dev.

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Wednesday, February 25, 2015

DP or Rambo Circus?

Bureaucracy is the death of any achievement… Albert Einstein!

Well the words have not been said by me but by a name whose intelligence & dedication towards achieving new heights in science, no one can deny & so I am safe in quoting it at the start of this sharing. There are very few names which need no introduction for any genre & Einstein is one such. So let’s go ahead as many will be curious especially my many friends from the bureaucrsy that why I chose this quote & where it’s leading to? No need to guess as we live in a city which always gives enough food for our brains, provided we are ready to use it & this time it’s the DP i.e. Development Plan of the existing city or old city or whatever you call it!

To those lucky souls who don’t know what DP of a city meant, it means every city is required to make a plan for its future development. So it’s a detailed plan with rules & regulations with which the civic administration is supposed to control the growth of the city in planned way. It consists of mapping all the land under the city limit & sees that it’s getting utilized for proper purposes which are essential for a good city. For e.g. we can’t have all the land under reserved just for residential purpose however high demand may be for housing. As just houses won’t survive on their own, agreed housing is at center of the planning but all the basic infrastructure such as office spaces, commercial spaces like shopping & malls, public health, education, public transport, water supply schemes, drainage & garbage plants, recreation & many such utilities also need to be in place & in proportion of the houses. At the same time there should be public parks & play grounds for social infrastructure & while planning all this we need to conserve the nature i.e. biodiversity in form of flora & fauna in & around the city. The later part means rivers, hills, forests & biodiversity i.e. numbers of animals & birds species living in city. As all above collectively is what makes a good city. Also just making provision of land for all these purposes won’t work but you need to draft some basic rules to make this possible in realty. Such as how much sq ft of area can be build in form of housing on a particular piece of land or what should be height of a building & what precautions to be taken for taller buildings. Road widths of access roads & their relation to the nature of buildings & thousands of such conditions while sanctioning the plans of individual building needs to be drafted, considering every situation in future. And the DP should held good for at least coming twenty years, so it should accommodate future challenges like increase in population & its needs which the city will face. As the roads today may seem serving properly to the existing vehicles; many will laugh at my statement but trust me I am just giving example, that the same roads won’t stand a chance after five years if we don’t make a provision for good public transport as well plan in a such way that citizen will have to make minimum travel for their daily rituals like work & school & recreation type activities! All this planning & rules & policies are what called as Development Plan & DCR i.e. Development Control regulations, which is talk of the town & our topic!

Failure to do this is what we are experiencing all around. The DP which has been made earlier have miserably failed to estimate the growth of the city & that’s why the traffic chaos & the inadequate services is the outcome. Every day the roads are being dug, even newly made roads too! Reason may optical fiber cable or gas pipe line or MSEB’s power cables, we have failed to make provision for the services while planning roads & entire city is suffering. Very basic essentials like Garbage Depot i.e. place for dumping & treating garbage were not provided in earlier DP's & we are depending on one single Phursungi Depot for years after years. The city lacks on public lavatories like essential services & there is no provision in DPs which have been made earlier. Neither there was provision for Transformer stations which are required for power greed all around the city making MSEB network go week in huge part of the city. These are just few examples to show what happens to the city & citizens if the DP is not properly made & which has happened in past.

Now the more enlightened souls will ask what is DP of old or existing city? What is meant by existing city? Didn’t the entire city exist since long? Well, that means boundary of PMC i.e. Pune Municipal Corporation which came in existence in 1950 & its boundary was same till some fifteen years back & then eighteen surrounding villages were merged in PMC which is called as new city & the earlier i.e. city within old boundary is called as old city. Now please don’t ask what’s this joke of making two separate DP’s for old & new city as I doubt not only me but even if the God also has answer for it? Anyways that’s different topic of discussion about why two DP’s of one city, so presently we focus on the issue of old city’s DP as now you are much better enlightened about the entire “DP nama”! So with lots of debates & discussions a DP of old city has been prepared & made public as it’s mandatory to get suggestions objections to this DP which is called as draft DP from the stake holders which is public or citizen in more sober words! And living to the name, Punekar’s responded with whooping near eighty six thousand suggestions to the DP! So a committee of seven members, three of them appointed by PMC & four by State Govt is set to take hearing about these suggestions from various stake holders & the work went for over four months! Right from changing of road alignments to cancelation of reservation of respective plots (which is obvious), all the suggestions & logic behind them was heard & the committee was supposed to give their opinion in form of a report to the civic body! Up to here all was well & the real fun beguine when it was time to deliver the outcome of the hearings! The committee came up with two reports i.e. the expert members appointed by State came up with different set of suggestions about the DP & the PMC appointed members have their own! Wow this can happen only in Pune as now what? Shall there be one more committee to choose between the two reports outcome? And the common citizen will get lost about the fate of the city, such are the statements in Media by everybody associated with the DP. The experts are saying they have not been provided with basic details such as detailed maps of city or river flood lines or hills contours & many such! And most of the suggestions are for de-reservation from individual lands or canceling the proposed road widening & even few of the experts have claimed that the pages have been changed from their report! This is serious allegation & no one from the administration or civic body has been denied it strongly! If there was no proper information about the DP then why committee members continued with the work of hearing of objections! Also how the civic body or the authorities accepted two reports instead asking the committee to sit together with their heads down & come up with one report? And the differences are serious as one committee is saying give three times FSI all around the city & other saying just along Metro track! If the views on so basic issue like FSI are so different then gods save the city & few of the experts have quoted in these very words that if this DP is implemented then the city is going to be doomed!

Well well, if we can’t decide the FSI like basic thing then land use, dying condition of river, disappearing biodiversity & ever increasing traffic with road jams at all hours of the day, garbage depot & many more, all such civic issues are sure going to be for a toss! Recently there was a news which get unnoticed that this year’s Metro budget provision has been used for some flyover work; if the news is true then why even make budget as well DP? As what we plan we can’t follow & the budget we make we use it for other purposes than planned, making mockery of entire city planning! As presently by a common man’s angle the existing DP is gone so it’s dead & new DP hasn’t been yet final & no one knows when it will be final, so right now there is practically no DP yet development is going on! So who is responsible for all of this damage to the city? I always wonder when it said by elected members which are our rulers in actual that administration didn’t provided this or didn’t responded or administration is ineffective, even media commonly uses this phrase many a times. Why don’t they pin point names or posts these so called administrators holding? So let real culprit get pinned & then take action against the individual. If the opinions of the so called experts are so negative then either scrap the DP & make a new one or appoint another committee & take all hearings again! As either the experts are right or they are fool, in both cases the outcome can’t be accepted which is right now happening! Frankly to a common man like me all this seems to be a game like the jokers plays in Rambo circus, hitting each other with hollow bamboo i.e. bass & just making sound of hitting! Unfortunate here no one is even acting like getting injured! And no wonder as the city whose citizen refuse to wear helmet even for their own safety, never follows the road signals unless there is a policeman at signal or throws garbage in their own river right under the board saying “keep river clean”, they deserves a circus only & not “achhe din’!

Its said the tree will bear the fruits of the seeds which we sow only; & what we have sown is carelessness towards the city as well shamelessly selfish attitude! So we ourselves are responsible for death of the city which is written all over the wall but with the designer eye glasses we are wearing we think its gates of heaven while in actual the gates of hell we are opening for ourselves! Unless we put aside the glasses & follow the right path & make our rulers deliver for what we have chosen them, hell is what we deserve & so we will!

Friday, February 20, 2015

Career in Real Estate!

“Real estate is the best investment on earth, however, when the music stops playing, which happens occasionally, don't be the one left without a chair.”….Steven Ivy, Attorney Entrepreneur.

Well the New York based attorney entrepreneur have hit the nail on head as in so few words he has described the real estate industry; if we call it as an industry! For me New Year’s seminars & lectures trend continued all along January & outcome is this sharing! I had been associated with Diploma Civil Engineering syllabus drafting & have suggested that with new opportunities in real estate the students must have flair of the industry. So a subject has been introduced in final year diploma of civil & the Govt Poly College called me to share my views about real estate at their place. I haven’t prepared anything special as I thought it’s sharing with a small group but when at the venue they took me to the Sir Vishvesarayya Auditorium, I was dizzy with nearly three hundred students welcoming me clapping! The last thing I want is to face college students without any preparation as to keep them engaged even for fifteen minutes is a big thing, here I was supposed to explain them real estate for over an hour! In the first place I had been called on various platforms as wild lifer, environmental person or as construction management guy but very rarely as a real estater which in common man’s words is builder! But then there was no escape route as before I could protest to the college team, my introduction has beguine & the students were looking at me with fascinated eyes as for the first time most of them have eyes on a real builder in actual!

I started with the same thread of fascination in their eyes as most of the common people when they think about real estate & builders they think money! That’s the irony of this industry as no one looks at end product but all are interested in the glamor which obviously is there for the money factor of it! It’s really difficult to explain real estate & the way it runs even to grown up people in business leave apart to students aspiring to have a decent degree & adopt this as their career. What I was supposed to tell them? You don’t need any degree, hell, even education also to become a builder! Rather I have heard many of the stalwarts in this industry jokingly saying the more you have educated the more are the chances of your failure in real estate! As on one hand it’s true that education makes you to think & the more you think in real estate the more you get aware about the uncertainties in it & then you delay the decision & delay is worst enemy in real estate! At the same time when I run in mind what are the responsibilities of a developer, there comes none! All you need to have some money in your pocket & you hire every available talent in the field & complete the building putting all the responsibility on someone or others shoulder; may it be architect or structural consultant or engineer you appoint at site!

Or am I supposed to tell them that in ever changing rules by numbers of governing bodies from PMC to Urban Development Department nothing is permanent here! The land you have acquired by checking all the known documents can be of faulty title because some of the heirs of the land owner have already entered in to unregistered document with some other builder & it comes to your knowledge only after you have paid all the amount to the land lord! And worst such non registered claim is accepted by the law & your deal goes to drain, shall I tell them this? Even if you buy the clear land then also road adjoining to your land can get shifted inside your plot or there can be probable Metro track going at some distance from you & as its FSI norms in the periphery within which your land comes, hasn’t yet finalized do your plans won’t get sanctioned! Shall I share such things to these young faces? Or when you have planned a building by setting all rules known to you yet as there is printing mistake in drafting the new rules by local governing body & now it’s not sure that when this printing mistake will be corrected & till then your FSI has been reduced if you want to get the sanction & this is going to hamper entire economics of the project, such things also happens in the industry, this I am going to share with the eager listeners? If you are lucky enough to get through all the legal claws & govt norms & able to start your project by complying all technical norms with Bar Charts, CPM & PERT like techniques; and then some stone & crusher manufactures organization goes on strike as rates of the materials has to be doubled because RTO has changed the norms of carrying materials like crush sand & khadi, so either pay them increased rates or they goes on strike, delaying every construction activity at your site. And no Govt department is intervening in this strike or rate hike demand! And then you get news that somewhere as the river sand digging auctions have not being done by the local Govt so there is no sand in the market & your contractors’ labors are sitting idle because of no sand at site! And with all these hurdles when you still continuing with your project you have to face accusing from media as well everyone around that you are making money & it’s you who is the sole cause of taking the homes out of budged from the common man!

So many scenes flashed in my mind which I myself have faced as a builder & I too am an engineer! But then I reminded myself that I was there not to shoo them off from being a builder but to encourage them to be part of real estate! It is fact that to become a real estate developer you don’t need to be a qualified engineer but things are changing fast & this was true for first genre of the developers. Now most of the second generation of real estate people is qualified & that too fields related to real estate such as civil engineering or management. This is because the clientele has changed, no more the buyer is a couple at retirement but it’s a lot matured young blood that is face of real estate customer & they are mostly either technocrat or educated by themselves. And no educated person will like to have his builder as uneducated especially when the product is home, which is one time buy for most! So this is a good news to all engineers, is what I told them. At the same time if an uneducated person can build a building then surely as a civil engineer it’s your responsibility to build better than him & to show the society that you can build better because you have better knowledge. So being an engineer & in the real estate gives you an edge over the non engineer or non educated competitors! Indeed to make this possible is a tough challenge but then what fun in working without any challenge is! Education is a weapon & it’s up to us how to use it; don’t let it become a shackle in your capacities but apply it to find new ways in doing your job.

Things have changed a lot in the recent past & clients does expect better product & they do appreciate it too. Our knowledge has been given to us to find new avenues of doing the age old things in new ways, which in the end will be in benefit of the customer only. And best part is present real estate buyer understand this.

At the same time being in real estate doesn’t mean just become a builder, that’s one of the roles in the industry. The industry needs good contractors, construction management consultants, structural designers, services like plumbing & waterproofing providers & much more. As the more educated people will come in this industry the more refined it will become. Agreed presently its most non professional profession but then that’s not fault of real estate but the people it has. As any business or industry is gets reputation not by the money it generates but by the quality of people it’s associated with! Real estate’s policies & non professional face is because of the people it has & which were always bothered about end product which for them was money & not a good home! The country’s over one hundred crore population is in a way boon for real estate; as that mean so many homes are needed. A home is one of the basic need of a human being & we have become self sufficient on food & clothing i.e. “Roti, kapda” but the “makan” i.e. home is still far less on supply side than demand. Presently the current Central Govt has taken housing as a serious aspect & the Honorable Prime Minister has said to set a target of nearly two crore homes in coming three years, so imagine to money as well opportunities involved in the segment! That makes real setae as best industry for making your carrier & with a degree in civil engineering you have far more chances of surviving here than any non technical person, is a fact.

Another aspect is creativity in real estate which a non technical person may not ever realize as what fun it’s there in imagining a structure on an empty land & then making it reality! Presently what this industry lacks is ideas which will change the age old practices, right from design too construction techniques too marketing the product! Fronts like Green Buildings & Affordable Housing are very much unexplored; as R & D is the weakest link here! With your technical knowhow you can fill in the gap which the industry is facing. Look at automobile of any other industry where there are thousands of option made available to the customer as per his needs & capacity to buy & at the same time look at real estate & the options it gives to the customers; we lack too much here also! I have full regards for every branch of education & yet real estate chiefly deals with civil engineering & obviously the one with education of the field held upper hand here is a fact. Also it doesn’t mean that someone couldn’t get education so he is unfit for the business but then mostly its inaccessibility to the education makes someone not getting it; no one remains uneducated by choice is a truth! You should be considered yourself luckier than those who couldn’t have their education & it’s this luck of your which is your responsibility to deliver the product in better way; then you may be a structural designer or contractor if not a builder!

Home is probably costliest product in our country & a once in life purchase for most of the buyers. And while you become successful person in real estate by selling your product to the client don’t forget your social responsibility i.e. your duty towards the society which has made you an able engineer. By me, being a successful real estater doesn’t mean how much is your bank balance or size your car fleet but what you have given back to the industry & the society! Neither success is how many sq ft of area you have built or the numbers of flats you have made but will count the success in how many numbers of families you have made happy by giving them their own home in the way they have dreamt for the same, as this is what makes real success! It’s that later part of success’s definition is what going to make your teachers real proud & to your own self too or else the real estate has enough builders who are successful. And lastly always keep in mind that you should be an engineer first & then the builder & not vice versa, that’s what real estate expects from you!