I don’t believe that is the only issue the sector faces today. It’s only one of the issues. The main issue is how to stimulate demand. You’ll only buy something you can afford. Therefore, prices have to be brought down to affordable levels. The issue is, how do we ensure that a quality product is affordable? If we meet this requirement, demand will follow. We aren’t tackling this issue effectively, as an institution or as a developer.

•Kakoli Chatterjee: Earlier, big players were reluctant to play in the lower segment margins. Your homes went for Rs 60 lakh and above. So, aren’t you also responsible for crisis?

No, that is not correct. We have wrong town planning norms. Nothing can be done without approvals and approvals are in accordance with town planning norms, depending on the state. Invariably, there’s a constraint on the density, that is, the number of dwellings per acre. There is a myopic vision on infrastructure, with a regulatory control on density. We need to relax density norms. Once density norms are relaxed, the developer can make more units. But for that, we need better infrastructure. It’s not as if there isn’t enough money for infrastructure. For example, in Haryana, the entire external development has been funded by the private sector. But the government is still sitting on almost Rs 8,000-Rs 10,000 crore. In my opinion, nationalising land development was a big mistake. The private sector went out of the game and fly-by-night operators came in. They dominated the sector till the mid-1980s. The whole system, thus, got corrupted. After 1991, the mantra was to think big and create surpluses, compared to the earlier mantra of think small and manage shortages. The ‘think big’ mindset has to dominate. For instance, we voluntarily reduced prices—others have to follow.

•Rishi Raj: Tomorrow, if you are made the Urban Development Minister, what would be the five major things you’d do to spur growth in real estate?

First, I would ensure that the subject of Urban Development is introduced as a subject in schools and colleges. Second, I would revamp the entire town planning set up. What was made in the 50s and 60s based on a British system is not relevant today. Town planning has to create surpluses. Third, I would revamp urban infrastructure and involve the private sector in a big way. Finally, I would change the concept as it now exists of the development authorities: government authorities must be enablers for the private sector.

•Praveen Singh: Since the global meltdown, what has gone wrong? Has new demand dried up or are old bookings getting cancelled?

India’s economy is not that dependent on the global situation though it is interlinked with foreign institutional investors (FIIs) and there’s an impact on exports. Other than that, a substantial part of the economy is reasonably well-insulated from the major turmoil. Therefore, we cannot say that the slowdown here can be entirely attributed to the global turmoil. What is prevalent is a lack of confidence. The interest rates have gone up to 14-15 per cent and it’s only very recently that they’ve come down. How can people own homes with this prevailing rate of interest? There was a time under Vajpayee when if you included the income tax incentive, the rate would come to 7 per cent. Whether you look at cars or homes, people aren’t buying because they think prices will come down further. New purchases aren’t happening because of high interest rates. We need to bring in fresh ideas to determine monetary policy, something the Reserve Bank of India has not been able to provide so far. Their tight monetary policy has been too shortsighted. The question of how the economy would cope during a downturn was never contemplated. All the job losses, all the repercussions are a result of this shortsightedness. 

•Kakoli Chatterjee: Do you want interest rates to be softened for construction companies or for retail consumers?

For everybody. The rates should be between 6 and 8 per cent to significantly impact demand. Rates all over the world are down to 1-2 per cent. Stimulating demand will automatically generate jobs and rejuvenate confidence. Lower rates and inbuilt fiscal incentives need to be provided in consonance. We need to pinpoint industries which have a cascading effect on other industries. The housing industry is a great contributor in this regard: for every rupee invested in housing, 70 paise goes into GDP. Cement, steel etc are all impacted as a result.

•Shekhar Gupta: As a businessman, how did you take this sudden fall, not just in valuation but in the stature and presence of your company? You used to be on the front page of newspapers as one of the richest Indians.

My lifestyle has remained the same. I have been asked, Mr Singh where do you buy your suits? I said, would you believe, I haven’t bought a suit in 5-6 years? I looked around my wardrobe and realised I’ve rarely worn the same thing more than once. Why should I buy for the heck of it? As for the valuation, that is something that matters only to dealers and those dealing in stocks. We are not sellers, so how does the valuation matter? Sometimes it’ll be up, sometimes it’ll be down. I have no clue how these things are decided.

•Shekhar Gupta: Do you look at your stock price?

I do. I am concerned because I want investors’ stock prices to go up.

•Anandita Singh Mankotia: How do you have villages co-existing with townships in DLF, Gurgaon? Roads have tractors and BMWs and we don’t know where to park.

Town planning is archaic because you cannot have an area of affluence as an island in poverty. It’s wrong. Around the village there should be a belt where there are gardens and schools as a buffer zone between the affluent areas and the village. These are town-planning issues.

•Mahima Kaul: What is your view of the Dharavi redevelopment project?

You really need a forward-looking plan. There has to be a blend of legislation with private sector enterprise. Legislation has to be such that they make a compulsory announcement that this area is now coming under redevelopment. Having done that, they then tell the private sector—whoever they select through competitive bidding, etc—to clear up the area and provide rehabilitation facilities. Do not allow the development of the entire area until the successful rehabilitation of slum dwellers. Urban planning has to be done keeping in mind the next 100 years. Look at Chandigarh.

•Sanjay Singh: Between 2002-07, roughly the period during which the boom lasted, developers launched a number of projects. A single developer had 70-80 projects, most of the them high-end ones. Was there sufficient demand for these projects?

This is entrepreneurship. Once you’re an entrepreneur, it presupposes initiative. The degree to which entrepreneurs are encouraged to take a risk will be a measure of the government’s success. It’s happening all over the world. When we started the mall business, we were ahead of the pack by 10-15 years. After that, there was a mall mania. Everyone knows that only 30-40 per cent of malls will survive. So what happens to the rest? They become storage space—warehousing as it’s called in America. At the end of the day, unless a shopkeeper makes money he cannot pay rentals. If he cannot pay rentals, he will leave and the mall will fail. This is the crux of entrepreneurship: the one who fails will learn a sharp lesson and not make the same mistake again. It should not be discouraged, it is the essence of development.

•Dhiraj Nayyar: Part of the reason why we are in this crisis is that banks abroad were too liberal. So a whole lot of people who shouldn’t have got loans got loans and the market crashed. How much of the increase in real estate prices in India was due to speculation?

Once growth takes place in India, you cannot stop it. India will eventually have 9-10 per cent growth. Once the economy improves, entrepreneurs of real estate will think of an opportunity ahead of the pack. In real estate, you start buying land 7-8 years in advance. There’s a risk component involved. It takes you 2-3 years to get approvals. Once land became scarce, commensurate with requirement, the price went up. Service tax is now 12.3 per cent. Apartments which we sold in 1998 at Rs. 1,296 per square foot, in 2008, would have been at Rs. 2,342 per square foot. Sharp increase in excise duties has resulted in this. And with the land prices increasing, people made extraordinary profits. The government thought that because they’re making profits, we can increase taxes. So there’s a cascading effect which is not good. What will harm the economy is that now, entrepreneurs will not take risks. This means that people will be thrown out of jobs, the economy will remain depressed. So we have to bring back confidence to restart construction. In the US, there were no checks and balances and a lot of defrauding took place. In India, this has not happened because mortgage per cent is still very low.

•Mihir Sharma: The middle class in India has never seen neighbourhoods decline, prices go down, malls fall into disrepair. Do you think we are mentally prepared as a nation for that to happen?

No, I don’t think this will happen. No businessman will consciously take a project to a loss. Having said that, in the last 10 years, prices increased because of governmental levies and the cost of land. If government levies are brought down substantially, if the interest rate is down, then prices can be contained. But in my opinion, land prices will not come down because town planning changes will not happen.

•P. Vaidyanathan Iyer: Most real estate companies funded their projects through short-term commercial paper of 1 year and invested in long-term assets. What is your estimate of the kind of short term commercial paper that real estate companies still have on their books, and what has been the banks’ response to reschedule them into longer term debt which most real estate companies have asked the government and banks to do?

Public sector banking institutes are very co-operative because they also need business. They are flush with funds. But converting short-term into long-term depends upon the track record of a borrower, because every borrower is different.  

•Mihir Sharma: Public sector banks are more co-operative than private banks?

Well, yes that is our experience today. To tell you honestly, they are quite efficient. But this is very much an individual borrower’s experience.

•Coomi Kapoor: Your company is intricately associated with the development of Delhi, starting from the time of Partition. Can you tell us how a finance company became a real estate company?

My father-in-law, Chaudhuri Raghavendra Singh, was a civil servant in Punjab and a Colonel in the Army. He had no money, but he had ideas. Around the time of Independence, he resigned from service. He had a smart idea of how to get farmers as partners in development. DLF’s success story is also this, about not just buying land from farmers but taking them along as partners in progress. Which means, when we buy land, they put money with us as a tradition. First of every month, they are paid back with interest. Our people are there for their weddings or family problems, etc. It’s amazing how this rehabilitation is carried out. My father-in-law convinced farmers that he was there to work hard but only if they gave him money in the form of land as credit. This is the story of DLF. Whatever made money, he would give back to the villagers. His business was taken over as part of land nationalisation in 1958. Some of the colonies that we started were Hauz Khas, GK 1, GK 2, Kailash Colony, Rajouri Garden, Model Town. Then land nationalisation took place and DDA came into the picture. We stopped, we didn’t go into unauthorised development. We set up a manufacturing company, American Motors, to manufacture electrical motors. I got involved with that which was my induction into the business. It carried on for 15 years. It is only in 1979-80 that the switch came. At the time, we had only 20-30 acres in Gurgaon. My father-in-law advised me that this business had to open up, and if we started, then DLF would be miles ahead of the others. So I took it upon myself and one thing led to another.  

•Poorna Bhattacharjee: How would you judge DLF’s credit status, especially when rating agency ICRA has downgraded its short-term debt rating?

Rating is a system of financial institutions. I don’t know how the rating is done. Rating agencies look at the business scenario. They look more at the perception of how likely is it that the money will be paid back to the lender. As far as we are concerned, God has been kind. We have never defaulted, won’t ever default, we have enough money. What we have is a shortage of customers.

•Sanjay Singh: Your Q3 results were poor. Why were the results so poor and how do you expect them to be in Q4?

This business of quarter reporting for real estate, in my view, is wrong. In something like manufacturing, there’s a set production line, set time when raw material comes in. In real estate, it’s a cyclical process. A project can get approval in one year or three years. There’s no doubt there’s a downturn. But we’re still profitable, in spite of that.  

•Dhiraj Nayyar: What about job losses within DLF?

We are not laying off people. But naturally, in our case, if there’s a slowdown in a project, contractors lose jobs because we don’t construct ourselves. If we don’t construct a building, thousands of people get laid off by the contractors.  

•Tanushree Roy Chowdhury: What about the recent applications for cancelling licences for new projects of DLF?

This is not a cancellation of licences. When you need to develop anywhere, including Haryana, you have to make an application, you have to give a large amount along with the application, communicating intent to buy. That amount is refundable. We made an application, paid a couple of hundred crores. But now that the market is not there, we don’t want to develop and want our money back. The government is giving us back the money which they are obliged to give.

•Dhiraj Nayyar: After the Nano fiasco, there was a view that private parties should directly offer to buy land rather than the government buying it.

Frankly, it is sad. In a developing country, land has to be acquired for development. No private sector can acquire land. You can only assemble some pieces of land in the right kind of atmosphere, like we did in Gurgaon. The Land Acquisition Act is archaic. It does not give market value to the person whose land is acquired. An urban person is being subsidised at the cost of farmer, as you’re depriving the farmer of the true value. The government has to give adequate compensation and resettlement to those whose land is being acquired.  

•Soma Das: Does DLF have a clear succession plan?

In my case, whether you call it a family owned or non-family owned, it is professionally managed. You cannot successfully grow an enterprise without professionally managing it. A family-owned business can have family members who are good professionals in their own right. My son is 50 years old. He runs the business, he is an MIT graduate. There’s no one better qualified academically. My daughter Pia is a Wharton graduate. My two grand daughters are Wharton graduates. These are high-grade professionals. It so happens that they are part of the family. But if they were not educated properly, they would just sit on the side. As for the succession plan, my son is Vice Chairman of the Company. He is my successor. Everybody knows it. And my daughter is next.