A Regulatory Framework is Imperative to Foster Investment in Green Buildings

Boman R Irani, Chairman and Managing Director of Rustomjee Group, was recently appointed as the national president of realtors’ apex body, Credai (Confederation of Real Estate Developers Association of India), representing more than 13000 developer members across the country.   A first-generation real estate developer and entrepreneur with over 27 years of experience and knowledge of the industry, Irani has a clear agenda to further strengthen Credai during his term (2023-25) and reform, and transform real estate sector, putting it on the path of sustainable growth,

In this exclusive interaction with Torbit Realty, Irani talks about the need to revamp reforms, especially need for a regulatory framework to foster investment in green buildings, Credai’s initiatives towards skill enhancement and promotion of sustainable real estate and growth prospects of the sector. Excerpts.

Vinod Behl

What is your agenda as the new president of Credai National?

Since 1999, Credai has been spearheading some of the pertinent conversations while being the leading voice for the real estate industry’s major stakeholders, most specifically developers and homebuyers. My predecessors have been able to build a strong legacy which we intend on continuing by implementing our own vision of G.R.O.W.T.H- G stands for Green Construction, R for Reform, O for Opportunity to build a New India, W for Women Empowerment, T for Transparency and H for Housing for All.

We have particularly embarked on green construction as a definitive way forward for not just Credai, but the entire Indian real estate industry. Credai intends to set sectoral benchmarks for following best practices and setting milestone targets to achieve our vision.

We have also tied up with Indian Green Building Council (IGBC) and aim to build over 4 lakh Green certified homes by 2030, out of which we’re looking to build 1 lakh homes in the next two years.

 How do you see the contribution of reforms in bolstering real estate growth and the need for revamping key reforms like RERA, GST and IGBC?

In recent years, notably since 2017, the regulatory landscape within the Indian Real Estate domain has experienced a profound transformation. Foremost among these developments, the implementation of RERA has emerged as a pivotal reform that has engendered a paradigm shift in the real estate sector. Through its heightened emphasis on transparency and accountability, RERA has significantly fortified the rapport between buyers and developers. Notwithstanding these accomplishments, it is our belief that other pertinent stakeholders exerting direct or indirect influence over projects and their timelines should also be encompassed within the purview of RERA.

The introduction of GST, while streamlining the tax structure, necessitates a more nuanced approach in specific instances within the real estate sector. This is particularly pertinent for redevelopment undertakings in cities like Mumbai, where GST is imposed on projects involving the construction of rehab flats for existing occupants without any cost implications.

In alignment with these considerations, the establishment of a comprehensive regulatory framework at the federal level is imperative to foster investment in green buildings by both developers and homebuyers. This framework may encompass authorization of augmented FSI for green-certified initiatives, expedited processes and a consolidated clearance system for green projects, waiver of fees for projects with green certifications and preferential rates extended by financial institutions.

 Industry bodies including Credai have been pleading for introducing the single window mechanism which has been a major roadblock for real estate to realize its full potential. What’s holding up this reform initiative?

Single window clearance remains the foremost request from an industry that could do with a more streamlined compliance procedure, potentially leading to reduced costs and enabling developers to deliver projects on time.The implementation of a single window mechanism in the real estate sector is facing delays due to various factors. There is a lack of stakeholder coordination and need for legislative changes.

The development of technological infrastructure that can enable a streamlined compliance environment is required. This can be done at both a central or state level; however, there is a need to invest heavily in technology for it to be successful and glitch-free. Also, there is a resistance to change from various stakeholders.

 The shortage of skilled manpower (including construction workers and real estate professionals), has been a major bane of the sector. What initiatives Credai has been taking for the skilling of manpower?

Credai’s Skill Development Initiative, established in 2011, has played a pivotal role in upskilling over 100,000 workers until 2022. With a dedicated commitment to nurturing a competent workforce for the construction industry, the foundation engages in both on-site and off-site training endeavors. On-site training blends theoretical knowledge with hands-on experience to empower personnel at construction sites. Simultaneously, during off-site training, individuals from source sites receive instructions relevant to the construction sector, subsequently finding placements and receiving encouragement to explore entrepreneurial avenues.

In the past year alone, Credai has effectively enrolled more than 21,000 construction workers in the National Initiative for Promotion of Upskilling of Nirman Workers (NIPUN), a housing ministry-endorsed programme aimed at enhancing skills within the construction profession. Collaborating closely with the National Skill Development Corporation (NSDC), the implementing agency under the Ministry of Skill Development and Entrepreneurship (MSDE), Government of India, Credai’s efforts align seamlessly with the Union Budget 2023’s emphasis on upskilling. This vision is reflected in initiatives like PMKVY 4.0, designed to train countless young individuals, and the establishment of 30 Skill India International centers across states to prepare youth for global opportunities.

Sustainable realty is the key to the growth of the sector. What role has the government and  Credai been playing to boost sustainable real estate? 

The real estate sector’s commitment to sustainable progress finds embodiment in Credai’s collaboration with the Indian Green Building Council (IGBC). In unison, we have embarked on an ambitious journey to establish over 1,000 green projects across the nation within the next two years, and an ambitious goal of 4,000 projects by 2030. Aligned with the objectives of past Credai presidents, who aimed at reducing carbon emissions and achieving carbon neutrality by 2050, our collective endeavor reflects the real estate industry’s trajectory toward equitable and environmentally conscious growth.

Through the ‘Green Crusaders’ Programme, our member developers have already undertaken more than 71 green projects, encompassing a vast area of 62 million square feet in partnership with the Indian Green Building Council (IGBC). Complementing this effort, we have conducted numerous workshops and informative sessions for our developers, fostering alignment with the overarching sustainability objectives that underscore the sector’s evolution.

 How do you look at the trend of real estate developers taking to debt deleveraging?

Deleveraging is the process of decreasing debt and reducing the risk of default by a company.  Real estate developers’ inclination towards debt deleveraging is definitely a positive trend, in our opinion. It has various benefits that not only impact the developer, but also other stakeholders within the ecosystem. It enhances market perception, raises market expectations regarding financial stability, increases investment capacity, and assures regulatory compliance. Developers can strengthen their financial position and pursue long-term success by lowering their debt levels.

 How do you find real estate as an investable asset class? Going forward, what growth prospects and trends do you foresee for the real estate sector?

During the initial phase of the post-pandemic era, the Indian real estate market displayed a gradual recovery. More recently, a robust shift in momentum has become evident, reflected in both heightened homebuyer confidence and increased sales activity. The demand for residential properties is currently at an unprecedented high level, largely driven by pent-up demand accumulated over the past two to three years. This post-covid course correction in Indian real estate is expected to persist for several upcoming quarters.

Real estate investments offer a unique blend of advantages encompassing diversification, income generation, and sustained capital growth. Distinguished by its tangible value, real estate stands apart from other asset classes and consistently enriches investment portfolios. As the average age of homebuyers trends downward, a pronounced inclination towards augmented real estate investments is anticipated in the forthcoming years.

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