High salaries fuelling construction boom

Fast growth in IT and allied sectors combined with various tax incentives and liberal housing loans have resulted in an unprecedented housing boom in Hyderabad and elsewhere in the state.

This has also brought a qualitative change in apartment culture at large in the city with a shift from utility centric low-cost housing concept to more spacious and luxury dwellings. It has also changed the very profile of many construction firms.

The first builder in the city to make flats affordable to lower and middle income groups with prices below Rs 1 lakh in Hyderabad limits, K Ravinder Reddy, chairman and managing director of the 20-year-old Janapriya Engineers Syndicate, has now transformed his company into a builder of state-of-the-art complexes to house IT companies in Hyderabad and Bangalore.

Not far from achieving the distinction of completing the construction of 20,000 homes, Janapriya has now made a seamless foray into luxury apartments and big commercial complexes.

In an interview with Business Standard, Ravinder Reddy shared his ongoing and future plans as well as his perceptions on the housing scenario.

Excerpts:

What are the factors that are driving the house construction sector today?

There has been a good impetus to the construction industry for the past 5-7 years or so. This is due to the Government of India's favourable policies. Income Tax exemptions for residential complexes, IT parks and BPO centres have played their part in the boom. IT exemptions are also available on the rental incomes from IT parks. All nationalised and private banks have started giving housing loans liberally unlike in the past. In addition to all this, individual home buyers are also getting IT benefits on home loans.

On the other hand, young graduates in the age group of 25-35 years are not finding it difficult to get jobs in the software and BPO sector with earnings ranging from Rs 10,000 to Rs 50,000 a month, which in Indian standards is a princely income. Though there is not much recruitment in government departments as such, by virtue of their seniority in service, government servants are also commanding good salaries ranging between Rs 10,000 and Rs 30,000 a month.

Besides this, employees in other private sector enterprises are also being paid better salaries due to the indirect impact of the higher earnings of their counterparts in IT and BPO companies since their managements are forced to enhance the salaries on account of non-availability of qualified candidates.

On the whole, there is tremendous impetus being witnessed with both employees and governments giving top priority to housing in the backdrop of increased salaries. Naturally, beautiful buildings are coming up in Hyderabad and other major cities.

How has this impacted your company's prospects and future plans?

Together in Hyderabad and Bangalore, we are on the verge of completing over 50 projects comprising 20,000 flats. As the affordability levels of people have improved, our company has also moved into the construction of luxury homes besides developing IT parks, big commercial complexes and multiplexes. A similar situation is expected to continue for the next 10 years as everybody is forecasting much higher growth in IT and allied activities than the present levels.

How is Hyderabad faring compared to Bangalore and other cities in terms of high-end housing construction?

Certainly, Bangalore has been in the forefront in this regard. Now, Hyderabad is fast catching up. The IT boom and its reputation of being a clean and green city, Hyderabad has everybody in its thrall.

What are the major ongoing and immediate plans of your company?

We are coming up with three good townships, two in Bangalore and one in Hyderabad, each having 200-250 independent houses. Apart from this, we are constructing two software parks, one in Bangalore with 3.2 lakh square-feet office space and another in Hyderabad with over 3 lakh square-feet office space in addition to the existing one which has already been rented out to several IT companies.

The Bangalore IT park is coming up near ITPL Park at Hudi Junction, which is ideally suited for IT players aspiring to scale up their operations. The company wants to retain the ownership of this prestigious IT project at Whitefield which is on the verge of completion. We are also planning to construct our fourth IT park in Hyderabad at our 1,200-flat luxury residential project, Janapriya Utopia, located on the way to the new international airport, which is also very close to the city centre.

A commercial complex, also rentable to IT and BPO companies, with 60,000 square-feet space is coming up in Bangalore located 9 km from the landmark Majestic, among other projects. Though the company has come a long way from its original concept of affordability to lower middle income groups, we still continue to follow economical prices and rents for these ventures. Coming to luxury flats, the cost ranges from Rs 15 lakh to Rs 25 lakh and independent houses cost anywhere between Rs 25 lakh and Rs 35 lakh and above.

Does it mean that there is no scope for low-cost flats or flats affordable to non-salaried sections which you had pioneered?

That is not the case. But our clientele or our target group no more falls into that category. That is why the company is not contemplating any such projects at present. In terms of scope, the demand is there. But these families come under unorganised sector whose income is not from salary or not specifically known. Just because banks do not come forward to sanction home loans to families under this sector, they are not able to buy. The government needs to come up with a mechanism to evaluate the incomes of these families so as to enable them to access to home loans.