Real Estate's ₹6 Lakh Crore Boom | Anarock Chairman Decodes India's New Asset Class ft. Anuj Puri

[00:00:00] Hold any property for long and you'll make money. Is it an asset class only for wealthy? Which is untrue either. Because when we say that the residential market has moved towards premiumization, what is really suffering is the affordable housing. From 52% and it has gone down to 6%. There are 18,000 developers in India. 18,000 developers and we're saying 11 developers will deliver one third of the sales. If you had 50 lakhs to invest in real estate today, then Anuj Puri Puri.

[00:00:28] And again, I'll say the next growth is going to be in the GCC corridors because that is unlikely to get disrupted by AI. Mumbai is the same. You will start to see Panwale and Mumbai 3.0 where the new airport has come in will become an area where there will be work, live and play that is going to come in. Yes. Dubai for speedy execution, Singapore for a lot more integrated approach and the policies and New York for the 10th city.

[00:00:56] Is there a property or an investment that you regret not getting your hands on? You save for years, you spend the money, you sign the papers, you start the EMI for the next 15 to 20 years of your life. That is the deal every Indian family signs up for without even questioning it when it comes to buying real estate.

[00:01:24] But when you're taking on that debt, the biggest developers in the country have been doing the exact opposite. Some of the top listed real estate players and developers have cut their debt to equity from 0.55 to 0.05. In less than a decade, they've basically wiped their balance sheet clean. So the real question is, are you building wealth with that EMI or just following advice that nobody's actually questioned over decades?

[00:01:52] Today, we're getting into all of it. Why luxury housing is booming? Why affordable housing is struggling to sell? How developers spot the next big location before anyone notices it? What India can learn from the UAE, which has built a global real estate reputation from scratch? And if you're planning to invest right now, what exactly that advice could look like? And to break this down, I've got the perfect guest. A man who's been reading the Indian real estate market for over 30 years.

[00:02:21] Went from running JLL India's 9,000 person team to walking away and building Anarok from absolute zero in 2017. He's a man who can decode real estate like no other. Let's please welcome Anuj Puri, the chairman and founder of Anarok. So Anuj, thank you so very much for taking the time out and being with us. I started off by saying that you can really decode the real estate space like no other. So let's get straight into it.

[00:02:46] I think we were discussing just a short while ago, you said there was that negative connotation associated with real estate in India. And now things are changing. Tell us some of the top three trends and why you think that perception is changing now. Thank you very much. And always a pleasure to meet up with you. You know, I do feel is that from a negative connotation that the real estate had, it has become a good sense of humor connotation in real estate.

[00:03:13] Because clearly, you know, the common belief was through the COVID and now through AI that offices are not going to do well. And, you know, last financial year ending FY26 is the best ever year that office sector has seen since independence of India. So contrary to the thought that office is not going to do well, they're doing very well. Contrary to the thought that, you know, on the housing, affordability is getting breached.

[00:03:42] And at some stage, you know, we're going to see calmness coming in. I mean, there's like 62% growth between FY22 and FY26. Yeah. And yet, on the other hand, you think is that the market is starting to really boom. And then you're starting to see the unit of sales falling. Yes. So I'm saying is, you know, from being so negative, it is really becoming a proper asset class today. The sector has matured.

[00:04:09] The regulators have come in, Real Estate Regulation Act. And as we go through, I'll perhaps speak in a little bit more depth on that is, and I do feel is that the maturity of all the stakeholders, not only of the developers, but occupiers on the office side, the private equity investors, you know, the buyers on the home side.

[00:04:33] I think it has become a lot more mature market than what it was pre-2014, when I would say it was like a wild, wild west. Absolutely. And, you know, I'm going to pick up on the fact that you said that it's actually an asset class that one can invest in. But the data and your own data shows that the residential market sales value has crossed 6 lakh crores for the first time. And it seems like premiumization really is the key driver for growth.

[00:05:01] So is it behaving like an asset class for wealth creation or like equities? Or is it an asset class only for wealthy? So I would divide into two parts of it is the first part is, which is a bit sad. And I'll say is why. Because when we say that the residential market has moved towards premiumization, what is really suffering is the affordable housing. Yes.

[00:05:26] So if we were to rewind back to FY 2018, 56% of the overall supply in the Indian residential was affordable. Today, it's a mere 6%. So from 52%, it has gone down to 6%, which means that it is really, you know, the rich and the premium who are being able to afford. And hence, the market is moving towards not only just the premiumization, but it is moving towards luxury.

[00:05:54] It's moving towards an ultra luxury environment is. And clearly, that's why I said it's disappointing to see that the affordable housing has gone down to that low level, which is single digit percentage moving from nearly 56% down there. As far as the asset class, whether it is, you know, for investment or it is only for the wealthy to remain, I would, Ivan, divide into two parts of it.

[00:06:24] On the residential, I do believe this is an end user product. It is not an investor product. Contrary to the thought that, oh, let's invest in residential and there'll be a capital appreciation or there'll be rental yield growth on the residential, I would not pretend that it is an investment class product. Yet on the other side, if you were to invest in offices on the income yield, I think it is a proper asset class.

[00:06:54] It is where you're seeing a lot of wealth managers, you know, wanting to invest their clients' money. You see family offices, you see high net worth individuals, you see private equity investing in those offices. So clearly an investment product. And then you go on to the third section, which is the REITs or the fractional ownership. Yes. And that is a proper investment product.

[00:07:18] So to answer your question, I would say is on the residential, I still think, Ivan, it is a more end user product. Yes, there has been stock price appreciation from the COVID times to today, but I would still not term that asset class, i.e. residential, as an investment asset class. You're talking about this pricing spike, you know, put it down for us in numbers.

[00:07:42] I mean, if you were to talk, say, in some of the metro areas in Mumbai, you know, in Delhi, what were prices like, say, pre-COVID? How much have they gone up to? How much do I have to shell out if I want to, you know, rent or even buy in these areas? I think it's a very interesting question. So I'll give you some data. Please.

[00:08:01] From 2020 to 2026, the price rise on a general trend has been 62% across India, which is about 10-11% per annum, still higher than the rate of inflation per annum. Inflation, maybe 5-6%, so, you know, we're saying it's double that of inflation. But I do want to pick up the period from 2013 to 2019. Okay.

[00:08:30] Because I said 2020 to 26, it has gone up to 62%. 2013 to 2019, it merely went up by 8%. Okay. So actually, if you look at it, what has happened from 2020 to 2026, it's a bit of a catch-up. That is also happening because 2013 to 2019, if over that six-year period, it was only an 8% increase, that means developers were compromising on the profit.

[00:08:59] Because the inflation on the construction would have been more than 1%. Yeah. So if you were to look at it from 2013 to 2026, overall, it's about 70% that has increased, which is okay because it's over a period of 13 years. A 70% increase is nearly 5% or 6% per annum.

[00:09:20] So actually, a lot of people only look from COVID to now, but you also need to rewind the story from 2013 to 2019 because there was a lot of catch-up that the prices needed to do at that duration. And if you look at the overall period from 2013 to 2026, you'll say it's okay. The price rise has been okay. Yeah. Okay. Fair enough.

[00:09:42] But given that you were talking about capital appreciation and rental yields, just break it down for us in terms of affordable housing in particular. Is the middle class now sort of getting priced out of actually owning a home? I think a very interesting question, Avant. Clearly, in many of the micro markets, they are getting priced out.

[00:10:03] So, you know, if you were to take an example where, you know, we live in Mumbai, from South Mumbai coming up right up to Bandra, Juhu. Even for that extent, Andhiri, they're getting priced out. Similarly, in other markets, if you do look at Gurgaon, you know, the products are getting priced out. Today, you know, 15, 20 crores is what the average launch of a new apartment is coming in.

[00:10:32] Similarly, Gachiboli and likewise in Bangalore. But I would put in a contrary comment to that as well, Avant. What is happening is that in these cities, there is new infrastructure that is getting laid. As a result of which, it is pushing the mid-level housing to the newer infrastructure places. For example, in Mumbai, it is starting to push it around the Panvel area, the Mumbai 3.0 area.

[00:11:00] Similarly, in Bangalore, it is getting pushed towards the airport, which is the north part of it. Similarly, in NCR, it is getting pushed towards Noida, which is where the new airport, Javur Airport has come in. So it is living in harmony, which is that some of the traditional areas are getting priced out for the mid and affordable level. Yet the new areas where the infrastructure has just come in, where the growth has just come in,

[00:11:28] those are the ones where the affordable housing and the mid-level housing is getting into. But by the way, I have no problem with that because the connectivity from there to the CBD, the Central Business District, is far improved. So it's not that you have to be taking public transport and sitting two, three hours to come to a place of work. Because of great connectivity now, physical infrastructure that has been put in place,

[00:11:51] this is no more than 45 minutes an hour, which is what a regular travel time to an office really is. Yeah, that is the truth. And, you know, there are a lot of these big developers like a DLF or a Prestige, for instance, and they're tracking about 45 to 52% of their, you know, full year pre-sales. What are they doing right or what are they doing differently compared to some of the other players that aren't matching up?

[00:12:16] I do feel is this is across all sectors of the economy that the big are becoming bigger, the strong are becoming stronger, and the brands are getting the premium. And the brands are getting the buyers to come, even if they are charging higher prices. And that's what's happening in Indian real estate.

[00:12:38] If you look at the top 11 listed developers, they have projected that they will be delivering 2 lakh crores. And we estimate that this year it will be 6.5 this financial year. So 2 lakh crore of sales they will do this financial year. We estimate that this financial year the total sales will be 6,50,000 crores.

[00:13:04] That means one third of the overall sales is going to be done by 11 developers. There are 18,000 developers in India. 18,000 developers and we are saying 11 developers will deliver one third of the sale. I mean that data itself lends to believe is that the premium, the branded, both listed and unlisted are the ones where the end user is gravitating to.

[00:13:31] Now why is the end user gravitating to these is because they know for sure that they'll be delivered on time to the quality that has been promised it. As a result of which even if the end user has to pay a 10, 15% premium over a non-branded developer, they're gravitating towards that.

[00:13:52] And I do feel is this phenomena will continue which is that the bigger developers will be eating sort of lunch of smaller developers. And that is where consolidation is going to happen. But by the way, I have seen in all the other industries which are non-real estate industries as well, that is happening. There is a fair amount of consolidation that is going on and Indian real estate, particularly on the development side, is no different. Okay.

[00:14:20] You do think that there is that clear segregation from the men versus the boys and that's only going to continue. Now if we could sort of break it down for someone who is really looking to invest in this space or want to understand it better. Firstly, do you think that that good old buying connotation of buying a property that is your investment still holds true in a market like this? Or do you think that with the rental yields, now renting makes more sense?

[00:14:48] Of course, the profile of the user plays a big role. But what's your take? You've been in the industry so long. I mean, it's a question that I can tell you is very difficult to answer because both have a merit. On the renting, there is merit, Ivan. I won't say buying is the only solution. Why there is merit is because it brings you flexibility. If you're in a job which is a transferable job, what am I going to do? Buy a home? I mean, there is a lot of friction cost in buying the home and then selling it. And it is not a liquid asset.

[00:15:16] So, you know, it has the flexibility. It has the ability to be able to upgrade yourself. It also does put in a fair amount of stress on your EMIs, on the monthly outgo if you were to buy a residential apartment. So, I would say is one has to be very clear that this is a long-term commitment that I am making to an asset.

[00:15:42] And this will be nearly 40% of my monthly income will go towards that EMI as a thumb rule. So, it cannot be taken lightly, a rent versus a buy. Yet, I feel is the way that the property prices in India that we have seen over the last couple of decades that have gone, it does lend itself to be able to go into the buy scenario. Because overall, if you look at the rent that you are paying plus the capital appreciation,

[00:16:11] I mean, it's nearly 12 to 14% per annum that has grown in. But even if you're to leave this financial math out of it, it is the security. You know, we always said that the debt should be made by myself. That is what it is.

[00:16:28] And through COVID, we saw a lot of instances where the owner of the apartment behaved very mischievously with the tenants. We saw a lot of the communities where they were living. There were different rules for the owner of the apartment if you were living there versus a much more stricter rule if you were a tenant. Because it was assumed as a tenant, you are irresponsible.

[00:16:58] And even if you have a COVID, you're not going to declare. But as an owner, you're going to be a lot more responsible towards the society that you are living in. And that's where I feel is that security, the emotional setup to say is that I own an apartment of my own. And the overall math, if you were to account for capital appreciation and rental yield, does lend itself to buy.

[00:17:24] But again, I retrade is it is flexibility on the rental and it is nearly 40% of your EMIs that are going to be consumed towards buying your first residential home. It's not easy and it's something that really needs to be kept in mind, like you said, with the 40% going in. You know, but we've seen the housing sales across the top cities, though that has fallen 6% year on year to about 91,000 from 96,000 a year ago.

[00:17:52] But we are seeing the new launches rise by about 7%. What exactly is the data indicating? And it is true, is the data that you've given is absolutely correct. But I would put some color to that is so this data is Q1 of this financial year, i.e. FY27 or Q1 of FY26.

[00:18:14] If you were to look at it, what happened in April was almost a washout because of the West Asia crisis. There was very little sales. People were just trying to understand what's happening with the stock market. What's happening with the overall scenario? Is this going to flare up? Is this going to create more trouble with a lot of their own businesses in terms of the input cost rise plus availability of raw material?

[00:18:44] So April was clearly a wipeout. May started to again pick up. June month was the best month in the last 17 months. Overall, there was 6% decline from April to June just by fact that April was a complete washout and May was say 50% off the last year FY26 May.

[00:19:06] But June becoming 17 months highest sales, we felt is that the market is not structurally in a decline. It was just that momentary West Asia crisis that has caught it out. Our thinking is that in Q2, you will start to see a lot more bounce back in the sale as the confidence is starting to come back that this West Asia crisis is perhaps not going to be here for long.

[00:19:34] Yeah, that was certainly a huge dampener. But as a veteran in this space, for someone who is looking to invest in real estate, what would be the top three mistakes that they should avoid? And what are the top three things they need to keep in mind? It's a very interesting question and also very difficult to answer because each sector, each segment of the real estate will have different mistakes. And what you need to keep in mind, residential will be different and then offices will be different.

[00:20:03] And if you get into perhaps the listed part of it is that is different. I will perhaps restrict it to resi. If you want, I can do offices as well. But let me start with resi. So the top three mistakes are first, don't get lured by just a price. Price is one phenomena. Look at the quality of the developer. Look at what they have been able to deliver in the past. Go to those buildings.

[00:20:32] Go to those communities who are living in there. Ask them. Five years later, how is the product still standing up? And is the quality of construction decent? Did the behavior of the developer post the sales was good enough for them to be able to do? So the first mistake people do is it's just about pricing that they look at it. They don't look at the quality of the developer. Second is RERA has brought in a lot of transparency.

[00:21:01] Yet many people don't go to RERA website to check the data. They are still believing what is being told to them verbally. Please do check the data. Third is look at the social infrastructure. Look at the social fabric around. Where are the schools? Where are the hospitals? Where are the recreational facilities? Is there a five-star hotel that is going to come in?

[00:21:27] How far is the job working place from that facility? How is the infrastructure? How is the connectivity going to be there? A lot of people miss that out as the social fabric. Okay. That what is the social fabric around that? So I would say those are the top three things that one really needs to look at it for RERA. And then pray you can afford it. That is true. Commercial.

[00:21:57] On the office side, it is a lot more mature market. Because it has gravitated much more towards leasing. And there are no more than three dozen quality developers in India who have been able to do that kind of leasing. Plus, many of these are now backed by private equity. So it is a lesser of a concern. One, you are leasing. So there is not as much of a capital outlay.

[00:22:23] And the second is that these are backed by private equity. Many of them are now in the REITs. And that is very well sponsored by the sponsors of those REITs. So lesser mistakes, but I'll still say is that on the office side, please look at where your employee base is living. Okay. Do an HR check of where your employees are largely going to come in. Okay.

[00:22:52] Second is, if you choose a city, find whether there is enough talent for the sector that you are in. For example, in Hyderabad, fantastic resources for pharmaceutical. But not necessarily fantastic resources for financial services. Mumbai has fantastic resources for financial services, but not necessarily for tech.

[00:23:19] For that, you need to look at Bangalore, perhaps. So that's the second, not a mistake, but the second criteria. 100%. That you need to look at. The talent resource pool. The talent resource pool of the segment. Of segment. That you're going to be operating in. And the third is, majority of these offices are being built to suit. Which means is that there is no ready space today available. You are taking a punt on the developer who's going to be able to prepare.

[00:23:49] Now, they'll do a great quality work. There's no doubt about it. But does it, would it get delivered in the timeline? Yeah. That you are promising as an occupier to your clients. That on this day, I will set up my office and be able to service my client. Because it is a built to suit. Just make sure that you're very clear with the timelines of the delivery by the developer. Okay. So we've got our criteria for residential and for office.

[00:24:16] Now, you've called these GCC-led employment hubs and infrastructure-driven corridors the next demand engines. Why do you think that an investor has not really capitalized on this? And how can they? And I'll explain what GCC is. You know, clearly, this is a back office of the corporate themselves. That's all it is. You know, we wonder what is this new term that is coming up, Global Capability Center.

[00:24:46] It's actually the back office of the corporate. So what happened many years ago, Avan, that these corporates, largely North American corporates, they were outsourcing to a third-party service provider. And the third-party service provider was delivering the solution. Today, that North American corporate has become very comfortable with India. They're saying, why do I need a third-party outsourcing company? I can actually set up my own base in India. And that is what a GCC really means.

[00:25:13] The thought is that many of these office buildings are going to get disrupted through AI. Now, if you were to look at the criteria of the GCCs, only 27% of the companies who've set up their GCC is tech. The balance, 73% are actually on the non-tech side. So, you know, there are a lot of pharma companies coming from North America. They're recruiting doctors. Yeah.

[00:25:42] And they are doing the next research here. A lot of the European auto manufacturers are setting up their design studios. So they're recruiting automobile engineers. So it's not as much getting disrupted by AI because there's only 27%. And that's why I'm saying is that the next growth is going to be in the GCC corridors because that is unlikely to get disrupted by AI. And second part is that you need to look at where the physical infrastructure is.

[00:26:12] And that's globally. It's nothing to do with India. Where the next new airport is coming in, that's where the market starts to move. If you look at it in India as well, the airport in Bangalore moved from South Bangalore to North Bangalore. And the market started to shift towards North Bangalore. Similarly, in Hyderabad, the new airport where it has come in is the market has started to move towards that direction. Mumbai is the same.

[00:26:35] You will start to see Panwale and Mumbai 3.0 where the new airport has come in will become an area that there will be work, live and play that is going to come in. So as an investor, as a developer, you need to keep in mind both. You need to keep in mind where the employability is, i.e. GCCs in India. And second is where's the new physical infrastructure that is coming up and that is likely the growth corridor.

[00:27:04] So what do you think now these developers are doing in order to actually identify the future high growth locations? How are they thinking about timing and demand cycles? So, you know, there are two categories of developers, Aman. One category is who's investing for today in land and saying, I have very patient capital. So I am very happy to invest today. Maybe over the five, seven, ten years, this area is going to come in.

[00:27:34] And there are several of those and they have profited in the past because as Indian cities start to expand, those land areas that they had bought, which were on the outskirts of the cities and they had bought it in acres, they are now monetizing in square feet because that area is now within the city limit. The second is developers who are largely listed. They cannot speculate. They cannot wait for five, seven, ten years.

[00:28:02] The markets don't salute that is. They are wanting almost ready to launch. So that is where the harmony is coming in is that the leading listed developers or leading unlisted developers are not playing a speculation for land game. They're saying is we need ready land. Yet on the other hand, there are developers who are saying is we have a lot of patient capital. We are very happy to invest and then hold on to that land parcel.

[00:28:30] Hopefully in the next five, seven, ten years, that will become a lot more dearer, that land parcel. And we will be able to monetize at that time. Okay, got it. What about, you know, the fact that we constantly compare ourselves to say some of the more developed skylines, if anything, like Dubai, for example. When you go, you can't help but notice the quality of their buildings, the infrastructure. Of course, the Mumbai skyline has changed quite drastically.

[00:28:55] What is India lacking in order to be able to match up to these when it comes to infrastructure and real estate? I would take three examples of global cities that I do feel is that Mumbai can learn from what they've been able to deliver. One is exactly one. What you said is Dubai. I'm very fond of that city. That city has great infrastructure that they have put in. But the learning from that city is the speed of execution.

[00:29:25] I mean, crazy the way that they are able to put in, you know, the infrastructure, not only just the roads, but, you know, the entire infrastructure, including electrification, sewage, and be able to make the land ready for it to be monetizable. So it's the execution. That's the first thing from Dubai. Second, I would say, is Singapore. Singapore.

[00:30:18] As India, to look at it. Yeah. And the third, I would say, is New York City. I mean, look at the density. What a beauty. What a beauty that they've been able to create these high-rise buildings. And yet the city works, you know, very well, very smoothly. So those would be the three. Dubai for speedy execution. Singapore for a lot more integrated approach and the policies. And New York for the density. Yeah. You know, you were talking about the speed of execution.

[00:30:47] And there's sometimes sort of that association with real estate that now if we're starting out, this is going to be a long-drawn process. But we have seen a lot of policy implementation and things come in. What has changed over the years from the regulatory perspective? I would say is the one biggest thing that has changed is RERA, Real Estate Regulation Act. Many people don't give it as much credit. And then perhaps they're also right because in some of the states,

[00:31:15] the implementation hasn't been as strict. Okay. A state like Maharashtra has been fantastic in the way that they have implemented RERA. So what it has really helped real estate become is a very investable product. Because of the Real Estate Regulation Act, as I said at the opening, that prior to 2013, when RERA wasn't there, it was a wild, wild west.

[00:31:42] As a developer, you could do anything with the homebuyers' money. And there was no regulation that would govern you. Today, that regulation has made sure that you're not only protecting the homebuyer, but you're also bringing in a lot more transparency, a lot more governance, a lot more financial discipline with the way the escrow mechanism works. And hence, it's become an investable product.

[00:32:09] I do feel is that there are some states still left that need to strictly follow. The RERA. RERA, I would say, is there is literally no change required. Maybe some tweaks there. So I'm not professing that there has to be more changes that you need to do. I just feel is that there has to be more stricter regulation. Now, you know, our real estate is a state subject. So center can only influence that much.

[00:32:37] Ultimately, each state, the leader of that state has to really pick up the RERA and then implement it to its fullest T, which I must say is Maharashtra has done very well. Okay, absolutely. And it has cleaned up the sector in a big way. And like you said, just protecting homebuyers, which is a big thing.

[00:32:59] But, you know, if one were to just look at the reality of the landscape, say in Mumbai, I mean, for someone who's even looking to buy a place in, say, the western suburbs, the affordability factor, of course, is one thing. And then I feel they're always thinking I'm compromising on something. Maybe there's no parking or the roads are dug up or, you know, there's an issue with this society, etc. What do you think like a regular homebuyer really needs to prioritize when they're looking at buying in some of these metro cities?

[00:33:29] I think two things. One, what is the age of the homebuyer? So they need to prioritize from that perspective is, you know, if they already have a largest family, then area. Yeah. You know, square footage of the apartment, you know, that is really the priority. If it is still a very young couple and, you know, there are two of them or they have a very small family, then it is the location that is the criteria that one will really need to look at it.

[00:33:56] Globally, if you were to look at it, the way that it works is it is really the mid-level housing, which is more on the periphery or the suburbs. Yeah. And the more affluent or the luxury or the premium is really more in the inner core of the city. India is starting to move towards that as well. Okay.

[00:34:16] That where you are now starting to see many of these mid-level housing, you know, getting perhaps on the periphery or the secondary market or we call it as a suburban market. And the premium and luxury coming into the core or like the CBD markets in terms of the location. But as a home buyer, I would say is you need to prioritize what your requirements are. Yeah.

[00:34:41] If it is a larger family, then I would say is I don't mind going to the periphery and the suburban because I get a larger area for the same price. Yet if I have a nuclear family and a small family and a young couple, I may actually want to live within the city to be able to enjoy the full perks of the city. And as the family becomes larger, then you start to move a little bit out of the city. Right. So individual, of course, it depends on the profile.

[00:35:11] Now, let's talk about the listed REITs and INVITs in India. And they've gone from a market cap of about 65,000 in 2022. It's grown 5x to about 2.1 lakh crores. What are your thoughts on REITs and INVITs? And I would divide into two parts. I would focus more on the REITs, which is real estate investment trusts. It has been fantastic.

[00:35:32] I'm amongst the first independent directors of the REIT, which was way back in 2018 when MBC and Blackstone had listed that REITs. And from there, this instrument has come a very long way. REIT was not really understood by many Indian institutional investors. Certainly was not understood by the retail investor.

[00:36:01] They didn't understand, is it a debt product? Is it an equity product? Obviously, you know, SEBI had also at that time put a limit, which was a higher limit to each REIT unit so that they could get only educated retail investors to come in. And subsequently, this has now been understood as a product by not only the Indian institutional investors, but also high net worth individuals, family offices.

[00:36:30] And now, really by the masses, that they've understood this is a product that is going to be giving me regular biannual income to come in. And majority of the REITs, right through the COVID as well, have delivered what they had promised in terms of the returns. So it's a product today that is becoming very acceptable that you're going to be able to get on an average between 12% to 14% return.

[00:37:00] You know, a return, perhaps if you were to lever it up, it can go up to 15, 16% per annum return. So it has, as a product, it has matured, it has evolved. We have now seen five listed REITs that have come in. But what is more exciting to me is from the days when I was sitting as amongst the first independent directors on the board of the first REIT of India, where we were struggling to educate the retail investor.

[00:37:28] Today, it is so encouraging to look at it and understand that this is a product that is widely understood by the retail investors. And they're benefiting by the policy that the policymakers were able to bring in as a product. Otherwise, you know, the developers would have to do strata sale of the building, and which was not the best way to be able to monetize that asset.

[00:37:51] So for someone who does not own a property and wants to invest in real estate, would REITs be the best way to go? Again, it depends, Avan. What is your need? Because I do feel is that your house, irrespective of whatever I've said before, and irrespective of whatever the financial is, as a house, it's an emotional buy. It's a security.

[00:38:16] And it is a need that should be delivered as a priority. So I would prioritize that for an end user, not for an investor. Once you have completed that need, emotional need that you have, then I would say REIT is a great product. You know, maybe about eight, nine years ago, there was only one product, which was on the listed developer on the stock market that you had to buy.

[00:38:45] Today, there are several opportunities. You know, REITs is one of those. Fractional ownership is another, which is really prompting and getting a lot more mature. And as we go through, one you will see is a lot more alternative asset classes of real estate getting into the public domain. One of them is the co-working. You know, there are five or six players that have got listed. So you will be able to play the game on the real estate listed side,

[00:39:13] not only by just buying the developer stock, but by a lot of the ancillary, you know, services, products, categories that are going to be available. Yeah. But I know while you spoke about the security and the emotional aspect of owning a home, I think affordability is still a big question mark. Like you said, you're willing to give up 40%, you know, toward your EMI of your earnings.

[00:39:36] Do you think affordability as we go into the next few years is going to become something that will be a little bit more manageable or are prices only going to scale up? So, Ivan, my thought is that as the cities expand, affordability will become easier. Okay. And why I say that is in a city like Mumbai, if you were to take a typical residential real estate project in South Mumbai,

[00:40:05] 70% of the cost of that project is just pure land. Now, I mean, whatever you do, the land prices isn't coming down. And if that is 70% of the cost of the project, then how are you going to be able to make that affordable? Yeah. So the only way it can become affordable is that if you put in a much more expansive infrastructure

[00:40:29] and open up a lot more other land parcels in the hinterland, for example, in Mumbai, connecting the North Mumbai, the way it has been done to the CBDs or South Mumbai, that brings down the land prices from 70% of the overall project to say 25 or 30% of the overall project. So I do feel is that as cities put in the infrastructure, the market will become a lot more affordable on the residential.

[00:40:58] If the infrastructure in a city is not put, then I dare say that the market will outprice itself because by the share land depreciation, it just becomes an unaffordable category. Okay. So you are saying that as cities expand and the infrastructure improves, affordability will become easier. What about this concept of, you know, buying second homes, etc. Are you seeing that as something that's picking up?

[00:41:26] For those who are living in metros, which are the interesting hubs that you're spotting? It is picking up. And we thought that this was largely a COVID phenomenon. But beyond that also, even COVID has now gone three, four years. Yeah. Yet, it is such a vibrant market on the second home. I mean, clearly we're in a city called Mumbai. If you were to look at Alibag, I mean, get onto the Roro every weekend. And it is jam-packed. Yeah. There is.

[00:41:54] So clearly, there is a need for a second home market as India becomes richer. You will see is that there is a requirement for second homes. We're seeing across various cities where second homes has really prospered. And Goa, which used to be a market that was being driven just by second home, today is a first home market. Yes.

[00:42:20] I dare say that Alibag, which is a second home market today, Evan, maybe in five or seven years will become a first home market. Yes. It's on its way. It is on its way. The way the infrastructure is being put in, there are a couple of bridges. Once they are fully laid out, I mean, look at the connectivity that Alibag will have towards your western suburbs of Mumbai.

[00:42:42] And hence, it is a place that one should really look at it to not only enjoy today, but also to be able to invest. Okay. And it is picking up. The need for the second home market is definitely booming. What should the government do if you had one request in the next budget for the real estate sector? What would be number one on your wish list? It will be to address the affordable housing. Okay.

[00:43:09] As it is, Avan, you know, if we were in the mid 50% in 2018 as a supplier on affordable housing and we're down to a mere 6%, you know, at some stage we have to look at it and say is that what needs to be done in terms of the policy? What needs to be done in terms of the pricing? What needs to be done to make it more inclusive? Yeah. To be able to bring in more affordability within the Indian real estate. So I would say is that'll be the number one thing. Okay.

[00:43:39] And 10 years from now, if you had, you know, if you could predict the future, what will real estate look like in India? Today, a lot of what we discussed and we discuss is pure residential. I do feel is 10 years from now, there will be various other products. There will be various other asset classes that we'll be discussing. We'll be discussing data centers. We'll be discussing more of warehousing, industrial.

[00:44:06] We'll be discussing our senior living, co-living, student accommodation. I mean, some of these sectors, if you were to look at more mature real estate markets, are very vibrant. I mean, in fact, many of them are listed on the respective stock exchanges in more mature markets.

[00:44:23] So I'm hoping 10 years from today, we're not only going to be discussing resi and office, we'll be discussing co-living and student accommodation and, you know, rental housing and senior living and hospitality and data centers. So that's what I do feel is that the maturity of the market would lend itself.

[00:44:45] Can you tell us a bit about where you're seeing, you know, certain cities maybe that have really surprised you with the kind of volume and pricing? And what are some of the big shocks that you've got? The cities that have really pleasantly surprised me is Bangalore. Okay. That city is, despite the infrastructure, just crazy. And the crazy traffic jams. And crazy traffic jams.

[00:45:11] Yet, it is nearly 25% of the full office leasing of India happens in that city. And that city is like a snowball effect that has happened. And there's every global occupier first wants to go into Bangalore and then decides which other city that I would want to go in. So I do feel is that it's become a city, despite the infrastructure, the most attractive and does continue to surprise me.

[00:45:37] Then there was AI that was going to disrupt that city and job losses were going to happen. It hasn't happened at all. I mean, there are more leasing activities that is happening, as I said, is at the start of our conversation is that last financial year was the best since independence of India. And Bangalore did even better in the overall game. So that city, you know, does surprise me. I think the city that in the past has disappointed and my guess is that may surprise me going forward is Kalkara.

[00:46:07] Okay. I do feel as Avan, that city has everything in it. You know, that city has the population. That city has a very educated youth. That city has the right infrastructure in terms of the metros, in terms of the port, in terms of, you know, the affordable housing. Yet we're not seeing as much tech, IT, international companies, GCCs going into that city.

[00:46:35] I do hope that over the next 5, 7, 10 years, that city, which deserves a lot more brighter space in the Indian real estate, does come in. Okay. Calcutta it is. And just to understand the economics behind the real estate projects, launching the scheme, how much money a builder is making, the risk, the margins, the land, financing approvals. Tell us a little bit about what goes on behind the scenes. I can summarize it very quickly.

[00:47:02] If you look at it, the listed developers, I mean, they're making sort of low to mid-teen margins. So contrary to the thought that the developer is making obnoxious amount of profit, it isn't true. And I'll explain why it is not true. And the math works out, you pick up any listed company which is in the residential space to see what's the profit margins.

[00:47:29] You know, it's sort of low to mid-teens. The reason for that is that on paper, it looks that there is a lot of profit. But there are so many unforeseen circumstances, so many delays. For example, this West Asia war. That West Asia war has led to a 27% increase in the cost. Now, the apartment that the developer has sold earlier, he cannot go back to the buyer and say, by the way, you pay me 27% more price.

[00:47:57] He has to deliver it in the same price that he sold it at, as a result of which absorbs all that shock on the balance sheet. So in the end, given all these unforeseen circumstances and the time delays that happen, it is sort of mid to early teens that the profit margins of most of the projects are. Okay. Anuj, before we let you go, we've got a quick rapid fire. Okay. So these are just snappy answers that come to mind.

[00:48:26] One real estate rule of thumb that Indian buyers still believe but you think is just irrelevant today. Hold any property for long and you'll make money. Okay. Which is untrue, by the way. Okay. Not true. Not true. Because if it's a vacant property, there's maintenance, there's property tax, there is a problem of getting illegally occupied.

[00:48:52] So the thought that the generation had to say is, any property you buy over a period of time appreciates, I'm saying is guys, be careful. Because there is a lot of tax maintenance and the hassle of handling awakened property. Yeah. Yeah. So that's, to me, a myth today. One city that you think is most overpriced in India compared to its fundamentals? Tough one.

[00:49:23] Be honest. I would say some micro markets of Hyderabad. Okay. I do feel is that, you know, the way developers are building luxury, to me, it does appear that there is an oversupply and overpricing in terms of the sizes of the apartments and the pricing per square foot. What about one city that you think is underpriced or undervalued? Calcutta. Okay.

[00:49:53] If you had 50 lakhs to invest in real estate today, actually invest yourself, not advising a client. Where would you put it? Where would Anuj Puri put it? Again, I'll say, you know, depending on the age and the income profile, I would do it in a REIT. In a REIT. Okay. Is there a property or an investment that you regret not getting your hands on? Not necessarily.

[00:50:17] But having said that, I would say is there are lots of land parcels that I knew would appreciate because the infrastructure was coming in and one could have taken advantage. Like give me one example. Ispan Vale. Okay. And as we speak, I would say Alibag. Alibag pricing in 2020, 21, 22 was far different than what it is today.

[00:50:41] And I'm saying is from today, going forward, you know, if one was to buy today, you will buy it in acres and you will sell it in square feet. Wow. Okay. You spoke of different asset classes, which is going to be the top new alternate asset class within real estate that you would bet on? I would, co-working is no more as new. Okay. Because it's got fully established. Warehousing industrial is not as much that new.

[00:51:10] It has got well established. I would say two asset classes that I do feel has a lot of rhythm in it. One is the senior living because of the way the demographics of India are coming up. And the second is rental housing. Okay. Those are the two. Senior living, rental housing. Would you be willing to share maybe just the craziest requests that you've had from a client with what they're willing to drop or what their demands were maybe? Lots of crazy. Yeah?

[00:51:38] We'll be here throughout the evening. Your dream city or dream property that if you could have anything anywhere, what would it be? I think dream city continues to remain Mumbai. Really? Lucky you. Yeah. So, you know, delighted having the vibrancy in here, the people. And the quality of infrastructure that has come up in the last five years continues to remain my city. Okay. Great. Thank you so much.

[00:52:06] On that optimistic note, we'll let you go, Anuj. Pleasure having you. Likewise. Pleasure speaking with you. There you have it. So, an entire synopsis of the real estate space. The fact that now it is becoming an asset class. We've got regulators who have done a lot. The maturity is increasing and the stakeholders as well are taking this space seriously. Premiumization is a big trend. We are seeing, though, that residential buying is more for the end user rather than just looking at it as an asset class.

[00:52:32] The middle class, unfortunately, in the macro market seems to be a bit priced out. But buying is the clear way to go because it definitely gives you the emotional aspect and, of course, the security. But be ready to shell out about 40% of the payment towards your EMI. We will see Q2 bounce back in terms of sales. In terms of residential, don't just get lured by the price. Look at the quality. Look at the rare hour. Look at the social infrastructure.

[00:52:58] And for the offices, keep in mind the employee base, the talent resource pool and your timeline. The next growth engine is going to be GCC. We can learn so much from Dubai and Singapore in terms of speed and execution. And the next asset class and the newer asset classes are going to be warehousing, co-living, senior living and so much more. I really hope you enjoyed watching this episode. Do remember to like, share, comment and please do subscribe to the channel. Thanks so much for tuning in.

[00:53:28] Catch you next time.