No, I think you have given me more credit than I deserve.

• It’s amazing, even if I may say it to you, that in a country where the financial management has been so conservative, with the government’s financial controls so strong, the most prominent voice in the world of finance is the private sector. And now the voices . . .

Well, we’ve been in this sector 30 years. We’re a financial conglomerate: we’re in every sector of finance; we’ve life insurance; non-life (insurance); we’ve asset management; we’ve a bank, a mortgage company, a property fund, a brokerage house. So we cover the entire gamut of the financial sector. So somewhere or the other you find HDFC’s name in one of the companies’ names being mentioned.

• I know you have to speak for HDFC, but Deepak Parekh’s a brand too.

Well, that’s what I’m told. But I would really say that people are dispensable. People come and go, and a company goes on forever. And while you’re in the company, you may be a brand, but we’ve competent management, and there’s never been a doubt in my mind that the day I step down, the company will probably do better than what it has done so far.

• Nobody even asks you that question, the question people ask Ratan Tata all the time.

No, I’m going to step down.

• And when will that be?

Shortly. You would like to do something else in the last five-ten years of your life. I’ve done this for so many years.

• What is shortly? You are young.

Even then, you must give chance to other people.

• So what is shortly?

And the very fact that you said that I’m a brand and I’m synonymous with HDFC . . . that’s a wrong thing to happen. And it’s dangerous. So it’s better to step down and give others a chance.

• I didn’t say you are synonymous with HDFC. I said you are a brand that represents India’s financial sector. Because when Deepak Parekh says rates may go. . .

But you know, you journalists have only one point of view on rates of interest. Wherever I go, whenever I meet a journalist of any hue, the only thing they want to know is interest rates. Is it going down? Everybody actually thinks that rates may go down.

• All journalists are borrowers. They are living on EMI.

That’s true . . . that’s true.

• So what would retirement mean for you? What will you do?

Instead of being full-time, one can be a non-executive chairman and spend time doing other things, like start playing golf, do some exercise, which I’ve not been doing.

• Before we go to anything else, bread-and-butter issues. Since I also live on EMIs, will interest rates go down? If yes, when?

Well, I think the rates have to go down. We’re trying to be a part of the global economy. We’re trying to have tax rates that are prevalent in the Southeast Asian countries. You can’t have interest rates that are totally different from other countries.

• What is the inflation threshold for you?

Well, three to four per cent, four to five per cent. Not more than that.

• So you agree with what RBI did, they squeezed (the interest rates).

Yes.

• So you don’t buy the criticism that the central bank has been too conservative.

I don’t. I think that even if you look at the housing market, the Reserve Bank anticipated problems in the housing sector. They took a number of steps in the last two years to slow down housing, to cool down housing prices. They didn’t succeed very much, but at least they protected the banks and they protected the housing finance companies.

• And you agree with that.

I agree with that. They prohibited us from lending for land. For the last 18 months, no bank, no housing finance company can lend money for land if a developer is buying land. We can only give money after they get commencement certificates, which is when they start construction.

• Again you agree with that.

Hundred per cent.

• You are agreeing to the restrictions being placed on your own growth, your own business.

Yes. Because you know the point is that every builder was buying land with bank money and land prices were going up, up, and up. Unfortunately, what has happened is that they are still going up because the Indian lenders have been substituted with foreign lenders. The huge increase in FDI that we’ve seen this year . . . this year we expect the FDI to touch $25 billion to $5-7 billion, and a fair amount of that is in real estate. So the builders have now resorted to borrowing abroad or taking equity or preference capital from overseas. And with that money they buy land.

• So when do you see the party stopping? I’m using the language of business channels.

I hope the party stops. We need affordable housing, mass housing.

• So are you saying the prices will come down or they should and will come down?

They should come down. I’ve been saying for the last 18 months that prices will come down. I’ve been proved totally wrong. In fact, my board tells me that you should say that prices will go up and then they will come down. (Laughs)So I’ve been proved totally wrong because the prices have not come done. If you take Bombay, for instance, the huge amount of development that is taking place in the next five years, I don’t see any reason for commercial prices to have to crash. Bombay commercial prices, like Connaught Place, Delhi, are among the costliest in the world.

• And now the development is quite fast.

Development is fast. If you see the amount of construction in Parel area, it is 80 lakh sq ft — 80 lakh sq ft from large mills — small mills I’m not including. Now this is all commercial space. So 80 lakh sq ft of commercial space will be ready for occupation in the next two years. Who is going to take that much space? Bandra-Kurla, MMRDA is auctioning land there, again six to eight developers. A crore and a half square feet has been auctioned already for commercial use. So if you add that, add Dharavi, add Parel, in the commercial space, there will be so much surplus.

• Do you see the same happening in other cities — Delhi?

I see the same happening in other cities. Residential, I have a problem. Because the developers have stopped making medium-cost houses. Developers are only interested in upper end — luxury end, as the margins are higher, they can demand whatever price they want. Someone has to build affordable housing. We’ve just forgotten affordable housing.

• And how do you do that while making commercial sense?

You have to put some financial incentives for people who build smaller houses. You have to put some financial dis-incentives to building larger houses. The profit margins are huge in the luxury area.

• I read one of your recent speeches, where you talked about the need for a regulator in housing.

I think there is a need for a regulator. There is regulator in every other business.

• But do other people in your business agree with this?

I think builders are opposing it. But I think it’s a boon for consumers. We’ve to protect the consumers. Today there are so many builders, who delay construction not by months but by years. And when the poor consumer goes to say he wants the house, they tell him to take his money and go away, because in the meantime prices have doubled.

• Oh, I see.

So there’s no way. They (consumers) are at the mercy of the developers. So you have to have some penalty, some control, some oversight.

• Let me go back to where we started this. For 18 months you have been proven wrong on the real estate prices. When do you see vindication?

I don’t see vindication unless we change the land policies.

• FSI laws are idiotic. For a country so short of land, we’re not allowed to go vertical.

We have very rigid FSI laws. Land laws have been faulty in India. I’ve been saying this repeatedly.

• Finally in Bombay, ULCRA has been abolished. I’m impressed the way you wag your finger at me, just because I stay in Delhi, and say that ‘You abolished it at the Centre.’

But you must know, Shekhar, there’s not a single sq ft of land in Bombay which is not in litigation. Everyone who had surplus land and who came under the urban land ceiling law has filed a case against the government. And government has filed a case against the landowner for acquisition. So by scrapping the ULCRA, more land is not going to come to the market. You have to also take a decision, to dismiss the cases in the courts then the land will be released.

• I see.

Because they have not talked about what to do with pending cases. There are thousands of cases in courts at different levels.

• Now that the law has been abolished . . .

Now the judges, or someone, has to decide that all the land in all the pending cases should be removed from courts.

• So increasing supply is one thing. You certainly think that the commercial property (rates) will come down.

From what we gather, there is a huge amount of construction. The other thing is that if you build so much commercial space, you must also have schools, colleges, play grounds, clubs . . . nothing else is happening.

• Without that you can’t make Shanghai.

You can’t. Yeah, you know there are many people wanting jobs in Bombay. The overseas Indian communities work in the financial sector. Bombay is the capital for them.

• I like your metaphor, vision and the heart.

Yeah, you need a heart to make Bombay a financial centre, not just a vision. You need to give land for good purposes — schools, colleges, clubhouses, for other activities.

• There’s a lot to be happy about in the way things have changed in your business. Just go back 30 years, when you joined HDFC as a Deputy GM.

No, no. There is a sea change in what has happened in India. We had an IPO that failed. Not failed but failed miserably. It was quoting, on the day of listing, 15% or 17% below issue price. And it was a measly amount of Rs 2.5 crore, the issue size. Yet it failed.

• You have talked sometimes about the need to bring pension funds into housing. Tell us a little bit about how that’ll work and how it’ll benefit people like us.

You see, housing is a long-term asset. Housing finance companies require long-time money. What is a pension and provident fund? Pension and provident fund is a social security to the man who works. We don’t have social security, our social security is the pension and provident fund. So this is long-term money. Today pension funds and provident funds are crying for new investment avenues. They are only allowed certain specific investments like the government securities, treasury bills, bank deposits. They are not even allowed to take AAA companies bonds from the private sector. They need longer term investments. We need long-term money to lend to younger people. For instance, one of the most heartening things that I find — when we started, the average age of borrower was mid-forties, 30 years ago. Today it’s 32. Average age has come down.

• So Deepak, if we meet one year from now — don’t tell me you would have hung your boots by then. You said that you want to retire, but within a year, later or earlier?

Within a year.

• That’s a quick deadline. And you have figured your successor?

Each company is run by competent people. Like I said, we have many companies in the group.

• But you won’t name the successor.

No, there won’t be. I will be the non-executive chairman. Companies are run by very good people, people who have been with us for long period. I don’t have any fear. I can still be non-executive chairman.

• Deepak, executive or non-executive, you will be there, I know.

Let’s see. Let’s see who is right.

• When we talk after one year, do you think interest rates will be lower?

Interest rates, one year later . . . I hope is at least 50 basis points lower.

• Do you see any progressive change in laws, FSI, land ceiling to increase the supply?

I think the government is trying. I would like them to take faster decisions.

• We haven’t talked about your work in the investment commission.

Well, we just got a two-year extension. Our three years were over.

• Name some successes (of the investment commission).

There has been a fair amount of success. Lafarge Cement. Posco is a work in progress.

• You are a past master in persuading government. If there’s anybody they listen to, from the corporate sector, it’s you.

No, no. I don’t think that’s right. They agree with the idea but they can’t implement it because of the state-centre issues.

• Deepak, I keep coming back to this. Do you ever look at the possibility of being in public life as a regulator. Your name has been speculated as finance secretary, finance minister, RBI governer.

No, I don’t think I’ll survive in that.

• I can’t let you go away without asking this question that everybody talks about but nobody asks. Tell us a little bit about this fable of the great rivalry in the financial world: between K.V. Kamath and Deepak Parekh.

I think it’s a figment of the imagination of the press and journalists and TV.

• No, all your friends in the corporate world.

Would you believe if I tell you that two days ago I had lunch with Kamath.

• That I will.

So we meet, we talk about stuff, and we compete hard in the industry.

• Thank you Deepak. We’ll come back in a year and let’s see how many promises are kept and how many predictions come out right.

Sure, thank you. Take care.