M Murali, Managing Director, Shriram Properties shares his views on the current state of Indian real estate market and how government initiatives and infrastructure projects are helping the market to rise from the slump.

Urban Real estate in India comes from nine cities namely, Chennai, Bangalore, Hyderabad in South, Kolkata in East, Mumbai and Pune in the west and Delhi, Noida, Gurgaon in the Northern part of India. These nine cities may be contributing close to about 60 per cent of Real estate development. The gap between the supply and demand is huge in affordable housing and it may take long years to meet the demand for the economically weaker housing.

Our Prime Minister’s vision of Housing for all by 2022 is a noble cause. Once this is achieved, this one mission alone can take our country to different heights. This will bring lot of prosperity to our country - crime rate will come down by more than 50%, productivity will go up by at least 30 per cent, and people would become more civilized. This must be done like an emergency for the prosperity of our Nation at all levels. From Shriram, we are keen to play an important role in contributing to our Prime Minister's vision. What is most important for our country now is Housing for All. Only this will uplift our society. For us to make this Housing for All to come true, we need affordable long-term capital. It can be through FDI or ECB or even long term bonds. We need to look at various options of making cheaper funds available for this sector.

The Delhi-Mumbai corridor, Bangalore-Chennai industrial corridor, and the developments in northeastern parts would bring new growth opportunities. It is a fact that some of the PE investors haven't made good returns so far. But the interest remains bullish from both PE investors and Venture capitalists.

RERA will bring down the number of players in the industry on one side and on the other side will have few good quality players. RERA will discipline the industry. But for the RERA and the industry to be successful, there needs to be some correction on the current RERA bill. GST will also help real estate growth in long term, but in short term the cost is likely to go up marginally. This is one industry which is over regulated. Any industry to grow well and to meet its objectives, the industry must be well regulated and not over regulated.

Currently, there is not much demand in Tier 2 and 3 markets. This will happen only when the industrialization happens in these cities. Having said this, urbanization is pushing its demand in these markets slowly. Real Estate plays a very critical role in Urban Infrastructure. Real estate defines the city architecture, city's culture and its behavior. Real estate and the urban infrastructure should go together. If we look at the civilization and older cities, the urban infrastructure and real estate were one phenomenon and it was not two different. Urban planning always included the real estate. This is even applicable to some of the latest smart cities like Barcelona, Shanghai, Singapore and even our very own Chandigarh. It just reflects the nature of the people. There are two ways to deal with this - build the city's real estate based on the nature of their people or define the real estate with the urban infrastructure to reflect the nature of the people. Historically, the rulers have used real estate and urban infrastructure to build a better society and to define the nature of their society.

Consumer will look for better product and better service. But typical Indian consumer mind, may not be willing to pay a good price for a better service. Overall outlook for the industry looks very bright and the growth can be at a rate of over 30 per cent YoY for at least next five years. Indians believe in owning homes and this acts as security to them. Hence I doubt whether rental housing can be a solution. Also given the yield Vs cost of funds, it may be difficult for rental housing to become successful. This can become success when the gap between the yield and cost of funds reduces. For the real estate not to become expensive, we need to focus on infrastructure growth.

Government should not have any role in defining the land prices is my view. Let us take the example of Hyderabad and Ahmedabad. According to me, the land and real estate prices will always be fair to the end users and will never sky rocket. It is because of the good infrastructure created by these states in the last ten years. The focus on infrastructure by these two states have not only kept the real estate prices in control, but also helped consumers to have a better quality of life.

In our country so far, the technology is catching up very slowly. This needs to be changed. Our Prime Minister has a great vision of ‘Housing for All by 2022’, and for this dream to become reality, new technology is the only solution. We should also focus on making Green buildings and this is the future. Bangalore has natural advantages as a city despite its huge problems on its infrastructure development. Chennai also has a lot of natural advantage because of its industrialization and higher level of literacy rate. Hyderabad follows these two cities. Having said this, the infrastructure that has been created in Hyderabad and the Government's vision plan for the next 20 years are incredible. If Bangalore and Chennai do not give focus on its urban infrastructure, they could lose out to Hyderabad in the next five years.

Any development need to be inclusive which is very important for its sustained growth. It is just not the infrastructure development, there needs to be employment generation for its long-term sustainability. The infrastructure growth offers short term employment opportunities and unless we create long-term employment opportunities, this will lead to speculation or such cities would fail. Once again, our Prime Minister's vision of ‘Make in India’ can bring solution to a major level. We may have to focus on industrial and agricultural development for our long-term sustainability. While creating the city design, we need to keep these two factors in mind.