India’s real estate and infrastructure sectors are witnessing transformative trends fueled by rapid urbanization, economic growth, and evolving consumer preferences. There is a growing demand for smart and sustainable buildings, with buyers increasingly prioritizing energy efficiency, green certifications, and modern amenities. Mixed-use developments that combine residential, commercial, and recreational spaces are becoming more popular, catering to the lifestyle needs of urban dwellers. To meet this growing demand, expert organizations must secure robust financial solutions that support innovative construction methods, prioritize sustainable development, and implement effective project management strategies. One such organization, Experion Capital, specializes in providing comprehensive financial services tailored to the real estate and infrastructure sectors.
They are a Real Estate and Infrastructure-focused Non-Banking Financial Company (NBFC) and a wholly owned subsidiary of AT Holdings Pte Ltd., Singapore. They offer comprehensive financial services, including real estate and infrastructure financing, fund management, and advisory, ensuring financial stability and strategic support for their clients’ projects.
Constrofacilitator recently had an exclusive interview with Mr. Chirayush Agrawal, CEO, ECPL. With over 20 years of experience in real estate investment, including 16+ years dedicated to driving growth and delivering value in the National Capital Region (NCR), he has a proven track record of managing high-value investments and resolving stressed assets.His expertise spans the entire investment process, from origination and deal structuring to recovery and exits. His competencies include fundraising, investor relationship management, risk mitigation, and strategic sales.
During the interview, he shared insights on major market challenges, Consumer behaviours and expectations, current trends in lending practices, property prices and demand-supply dynamics in real estate and infrastructure segment and much more.
Here are the excerpts from the interview
1. With ongoing urbanization, what are the major changes you foresee in infrastructure development and real estate demand in urban areas?
The rapid urbanization in India is resulting in increased demand for various social and economic infrastructure in cities. This includes the need for improved water supply, electricity, roads, transportation, sanitation, education, healthcare, and public services. The government is also prioritizing the development of housing, offices, and recreational spaces to meet this growing demand.
To accommodate the expanding urban population, cities are implementing both horizontal expansion, by adding new areas to urban plans, and vertical expansion, through increased Floor Area Ratios (FAR). Urban development plans are being created for periods of 10-20 years, allowing for scientific anticipation of future demands and the implementation of appropriate growth strategies.
In response to the demand for affordable housing and public infrastructure, cities are expanding their municipal limits to include new sectors. Additionally, public transportation options such as metro, monorails, and road networks are being prioritized to alleviate pressure on existing infrastructure.
To incentivize private sector development, the government is offering incentives for the construction of affordable housing, public parking spaces, and public infrastructure. In areas near metros and monorails, taller buildings and higher population densities will be permitted.
Most of the funding for infrastructure development will come from development charges, the sale of purchaseable FAR, and other incentives given to the private sector. These measures aim to support the sustainable growth of cities in India and improve the quality of life for urban residents.
2. What are the most significant regulatory challenges currently facing the real estate and infrastructure sectors?
For any infrastructure or real estate project, a large number of approvals are required for environment, water, fire, mining, right of way and many more state or city specific approvals The lack of a single window for approvals and the involvement of multiple agencies at different levels of government can lead to delays and uncertainties in project execution. The variation in approval processes from state to state and city to city further adds to the challenges faced by developers. Any change required by one agency can have a cascading effect on the other submissions, causing further delays and difficulties for the project. This uncertainty and delay in approvals are perceived as significant risks, especially for long-term real estate and infrastructure projects. Foreign players are hesitant to enter the development space due to these risks.
Private players, including concessionaires involved in PPP projects, bear the financial risk of delays or denials in approvals. They invest substantial capital in these large-scale projects and are responsible for managing a large part of the approval process. Any delay in execution can result in penalties and even termination of the project.
The real estate sector also faces challenges in accessing financing sources, as it does not have the status of an industry. Recognition of the real estate sector as an industry would enable easier access to various banking sources and additional support.
The implementation of the Goods and Services Tax (GST) in the real estate sector has the potential to bring greater efficiency, particularly in the affordable segment. Streamlining the tax structure can help reduce costs and make housing more affordable for buyers.
3. How have consumer behaviours and expectations changed in recent years within the real estate market? How is ECPL adapting to meet these changes?
In recent years, consumer behaviors and expectations in the real estate market have undergone significant changes, particularly post-Covid. Here are the notable shifts and how Experion Capital Private Limited (ECPL) is adapting to meet these changes:
1) Increase in investor activity: The real estate sector has seen a surge in investor activity post-Covid, both in the residential and commercial segments. Low interest rates and the perception of real estate as a stable investment have attracted a large number of investors. This increased demand has led to an increase in pricing across various locations in India.
2) Rise in demand in Tier II and III cities: With improvements in connectivity, Tier II and III cities in India have witnessed a rise in real estate demand. This is especially prominent in the plotted segment, where buyers are looking for affordable housing options. The demand in these cities is driven not only by local customers but also by investors from Tier I cities who are seeking growth prospects in emerging markets.
3) Empowerment of consumers: The implementation of laws like the Real Estate (Regulation and Development) Act (RERA) has empowered consumers in the real estate sector. RERA provides protection to homebuyers and promotes transparency and accountability in the industry. This has increased consumer confidence and improved the overall trustworthiness of the sector.
4) Focus on larger homes and open spaces: The Covid-19 pandemic has resulted in a shift in housing preferences, with a greater emphasis on larger homes and open spaces. Homebuyers are now looking for properties that offer more space for remote working, recreation, and social distancing. This has led to an increased demand for properties with bigger layouts, balconies, gardens, and access to outdoor amenities.
5) Preference for established and reputed developers: Buyers are now more cautious about investing in real estate and are preferring established and reputed developers with a track record of timely delivery and quality construction. The uncertainty caused by the pandemic has led to a greater emphasis on trust and reliability in the real estate market
Impact of above changes on Developers and Lenders
1) Impact on Developers:
– Higher land prices and increased construction costs due to improved amenities have put financial pressure on developers. They may need to seek higher financing requirements for their projects, either through bank loans or alternative funding sources. This could impact their profitability and cash flow management.
– The increased demand and acceptability of projects in Tier II and III cities can provide opportunities for developers in these regions. Developers may consider expanding their presence in these cities to tap into the growing market. However, they will also need to adapt to the specific characteristics and demands of these markets.
– Compliance with regulations like RERA has become crucial for developers. They need to ensure transparency, timely delivery, and adherence to quality standards to maintain their reputation and attract buyers. Developers have become more disciplined and organized in their operations to meet these regulatory requirements.
2) Impact on Lenders:
– Lenders have become more receptive to financing projects in Tier II and III cities due to the increased demand and growth prospects in these markets. This can provide new lending opportunities for banks and financial institutions.
– Lenders have also become more cautious and vigilant in assessing project viability and developer credibility due to the increased scrutiny and penalties for non-compliance with regulations. They closely monitor developers’ adherence to protocols during construction and penalize defaulting developers.
– Higher financing requirements for developers can impact lenders’ risk assessment and loan disbursement processes. Lenders may need to conduct more thorough evaluations of developers’ financial health and project feasibility before approving loans. This can affect the overall financing landscape and lending criteria in the real estate sector.
In summary, the impact of changes in the real estate market, such as increased prices, focus on Tier II and III cities, and regulatory compliance, have implications for both developers and lenders. Developers face financial pressures, adapt to market demands, and comply with regulations, while lenders assess project viability and monitor compliance. These changes can shape the dynamics of financing and lending in the industry.
4. Could you discuss the current trends in lending practices within the real estate sector, such as changes in loan-to-value ratios, interest rates, and loan tenures? How are these trends affecting both lenders and borrowers?
The series of stringent measures implemented by the Reserve Bank of India (RBI) to tighten the grip on lenders and handle potential risks in the financial sector have had an impact on the real estate industry. These measures include tighter capital adequacy norms, enhanced scrutiny and management, and better risk management and corporate governance norms.
As a result of these measures, lenders have adopted conservative lending practices in the real estate sector. They now have lower loan-to-value ratios and place a greater focus on project feasibility before providing funding. These measures aim to reduce the risks associated with lending to the real estate sector and ensure that projects are financially viable.
The tightening of capital adequacy requirements and the introduction of special reporting norms for the real estate sector have also contributed to conservative lending practices. Lenders now have stricter requirements when it comes to lending to the real estate sector, which has led to increased scrutiny and a more cautious approach.
One of the consequences of these measures is that the overall cost of borrowing for developers in the real estate sector has increased. This can impact the viability and affordability of projects, as developers now face higher borrowing costs.
Additionally, the tightening of credit norms has resulted in the consolidation of lending in the real estate sector. Lenders are now focusing more on established and reputable players for funding, rather than smaller and riskier developers. This is in line with the consolidation trend among developers, with larger branded players expanding their presence across different cities and phasing out smaller developers.
Overall, the stricter measures implemented by the RBI have led to conservative lending practices in the real estate sector, higher borrowing costs for developers, and a consolidation of lending towards established players in the industry.
5. What is your outlook for the real estate market over the next few years? How do you anticipate trends in property prices and demand-supply dynamics will evolve?
The real estate sector is one of the most globally recognized sectors. India Real estate industry is projected to grow to USD 1tn by 2030 up from USD 200bn in 2021. Govt. has launched housing for all projects in 2015 and recently approved development of 3 crore homes under affordable housing scheme in next 5 years. Last year, demand for residential properties surged in the top 8 Indian cities, driven by mid-income, premium, and luxury segments despite challenges like high mortgage rates and property prices. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India’s growing needs.
India’s growing population, urbanization and ever-expanding middle class creates fundamental demand for residential real estate in urban areas. Retail, hospitality, and commercial real estate go hand in hand with growth of the residential sector.
The growth prospects of the real estate industry in India are indeed promising. The projected growth to USD 1tn by 2030 indicates the potential for significant expansion in the sector. The government’s initiatives, such as the housing for all project and the development of 3 crore affordable homes, further support the growth trajectory.
Despite challenges like high mortgage rates and property prices, demand for residential properties has surged in India’s top cities in the last 1 year. This demand is driven by the mid-income, premium, and luxury segments. The growing population, urbanization, and expanding middle class all contribute to the fundamental demand for residential real estate in urban areas.
In addition to residential properties, retail, hospitality, and commercial real estate are also experiencing significant growth. These sectors are essential in providing the necessary infrastructure to support India’s expanding needs.
Overall, the real estate industry in India is expected to continue growing due to favorable government initiatives, increasing demand for residential properties, and the development of supporting infrastructure.
6. How is ECPL integrating technology into its operations and customer interactions to enhance efficiency?
NBFCs using technology can leverage their capabilities, steamline processes and provided customized services to their clients. In ECPL we believe technology augments human capabilities and allows us to give superior outputs. We extensively use technology for our deal evaluation and data analysis. We are planning to move our entire monitoring reports to a digital database where data can be retrieved on a real time basis. As we grow we will introduce more tech solutions to provide better services to our clients.
7. Can you elaborate on ECPL’s upcoming investments and expansion plans? How do these align with the current trends in the real estate and infrastructure sectors?
With the growth in Real estate and Infrastructure the requirement of funding will increase on a consistent basis. ECPL mission is to provide credible financial solutions that allow our client to perform better and grow in future. The company’s long term goal is to expand in all major cities in India and become a one stop real estate and infrastructure sector solution provider.
