To launch 14 mn sq ft in FY16: Prestige Estates

Irfan Razack, Chairman and Managing Director, Prestige Estates, says the new real estate regulation bill will help bring discipline among developers and protect consumers. However, the new bill has brought under purview even the previously launched projects. This, Razack believes, will create chaos and delays in project execution and ultimately affect consumers.   

Razack believes the regulation of maintaining 70 percent of the construction value in an escrow account is a negative as this would increase borrowings for companies and in property cost for the consumer.

The torrential rains in Chennai have hit two large projects of the company and will get delayed, Razack says, adding that this should not be a deterrent as a total of five new projects in Bangalore and Mangalore are ready for launch. The company expects to launch close to 14 million square feet in FY16.

Below is the verbatim transcript of Irfan Razack’s interview with Sonia Shenoy & Reema Tendulkar on CNBC-TV18. Sonia: There are still some gaps in the eventual implementation of this Real Estate Development Bill. However, when it comes through in its entirety how do you think it would impact the sector? Would it impact the sector at all? A: It will certainly impact the sector. There are two ways of looking at this bill one is it will bring in a lot of discipline amongst the developer fraternity. However, the only thing where we are disappointed is that when we had interactions with the government through CREDAI, then we went through the bill to rationalise it in such a way that the projects that were way to be implemented in future is supposed to be brought under another purview of the bill and to eliminate the projects that were underway or under construction already launched.  Now the bill has ignored that and it is now trying to bring in even projects which have been launched earlier. That will bring in a lot of confusion in the market. They are about 17,000 projects as per one report that I read recently. Now to bring all those under the purview of the bill and it will be one massive task. It is going to create total chaos and confusion.  Finally, the intent of the bill is to protect the rights of the consumers in a way it is correct. It is the step in the right direction but with this cross purpose I think it is going to bring in too much chaos, too much confusion and that will actually stop the activity of the developers and that is not good for the consumer. I only wish that this bill was only on the way ahead. Another thing that has happened in the new amended version of the bill that has been approved by the cabinet is that earlier they had a provision for keeping 50 percent of proceeds in an escrow accounts to be kept exclusively for construction.  Now the current provision says again reverts back to 70 percent which will actually suck out the capital because there is a huge amount of money the developer has to ----- (NO AUDIO) again for ploughing it back that is going to be a big hit and you are going to lock up fund unnecessarily. I agree to the extent that whatever funds that are required only for construction even if the bill has said that it was fine.  However, if you are going to lock up money not only what is required for construction but also what you have paid for the land it is going to make the product that much more expensive because the borrowings will go up. There will be that much more leveraged that happens and then that means the interest cost has to be added to the product. So, net-net the activity will become slow secondly the cost of the product is going to go up. Thirdly availability or the products are going to be reduced and the loser again is the consumer.