NOIDA REALTY THE EPICENTER OF EMPLOYMENT FOR THE NEEDIEST

 The sight of the mass exodus of labour from NOIDA to UP and Bihar after the Prime Minister announced a lock down would have stirred the compassion of even the most stone hearted.

The entire country through their TV screens would have got a glimpse of the  massive number of unlettered  people employed by the real estate businesses of NOIDA. It Is highly important to note that the real estate sector provides wages and livelihood to the lowest of the low strata of the society. But sadly,  this sector faces gross neglect from the financial support system. While sectors like automobile, metals and minerals, power,  Oil, FMCG,  which today do not give any large scale employment to people because of dizzying levels of automation  get red carpet welcome and government support everywhere,  the real estate sector, on the contrary in spite of providing  employment to the large section of the  most underprivileged people does not get its deserving  honour or support.

I am the CEO of the only Indian end- to- end manufacturer of Fire Alarm systems  and our speciality is the real estate sector. We have deployed  fire alarm systems in around 25000 apartments spanning 160 high rise  towers in over 27 projects. As I have been front ending the marketing activities of our company, I have had the opportunity to closely interact with the directors and founders of many of these real estate companies and I have a very important perspective to present.

An entrepreneur, whether successful or not is basically a person who ventures out of safe havens to the  rough risky high seas. He is zealous and wants to do something which will create an impact. This is the DNA of  an entrepreneur. So is the case with the builders of Noida. Most of these builders in Noida are   new generation businessmen who ventured out and launched massive projects when the local state government provided a conducive opportunity around 20 years ago.

Their “drive to build and create” has seen millions get affordable low-cost homes. Providing affordable but decent quality homes has become their passion and second nature. Their core  teams after 20 years of exposure to the industry have acquired cutting edge, engineering, commercial, legal and statutory  expertise in mass construction of residential and commercial infrastructure. Their teams are assets of our country. A massive new city called Noida,  with broad roads and facilities, the likes of which have been never seen  in the country has been established owing to their enthusiasm to make a mark.  The biggest bonus however has been the continuous livelihood  that these entrepreneurs provided to the unorganised  labour community. Millions of labours have been employed in this belt from Uttar Pradesh and Bihar.

This unorganised labour community is unlike the organised industrial labour, who,  owing to their continuous presence in the same area  are affiliated to unions and hence have political clout. The labour in the construction industry is  the most unrepresented class, without any social security, insurance and  free access to medical facility. They mostly sustain on weekly wages. Either they get their wages and survive or they do not get their wages and suffer and sacrifice without an option. Their numbers are really big.

This lockdown for the first time exposed their numbers. And, believe me, as I tell you from my first-hand experience, that only a very minor percentage  of them actually came down to the streets. Majority of them are still staying put as many of the landlords and employers  have been benevolent.

One of our main duty as a society and as a nation is  to take care of this class and provide for them. The strata beyond them, starting from the organised industrial labour, are well protected and represented. Any major disturbance from the other upward strata would be highlighted in various arms of media.

If these voiceless people are victimised even after 70 years of Independence, then what kind of a progress are we witnessing or creating. By victimization I am not talking about the lock down. This class is resilient. They will brave this out. What I am trying to refer here is a larger problem in our economy – the gross neglect and lack of support to the real state sector which is the largest employer of this unorganized labour community.  

For the last 2 years I have been trying to organise working capital for my company which has been serving the real estate sector. On knowing that we are supplying to the real estate sector the banks instantly refuse to fund. I have heard cases first hand from the Directors of the builders that the banks have refused to fund them even if they are willing to offer 95% construction completed infrastructure as collateral security.  If looked at logically, funding the real estate sector seems to be the safest option for banks as they have very saleable fallback collateral in the form of property. The disinterest of the banks and their drastic distancing from the real estate sector is beyond my understanding.

After the implementation of the RERA act the sector has had to increase their compliances and transparency multi-fold. This has of course added to their cost. But still the banks have not opened up their purses to this vital sector.  Everyone is aware that the demonetization has hit this sector the hardest. The upwardly revised  in the minimum sale price by the government in many cases is higher that the market rates of the  property.

I was informed that  a  top level delegation of builders tried to meet up with the Chief Minister of Uttar Pradesh but were denied an audience as he was not interested to meet realtors
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Like most others I was also under the opinion that the realtors have diverted funds to create personal assets and have misused and over leveraged the funds. In one of my meetings with a senior director of a big builder when I brought up this topic he had an altogether different story to tell. He said that the erstwhile Chief Minister encouraged and pushed these Builders to acquire more property from the Noida Authority and assured every kind of Support. The Builder only had to deposit 10% of the amount and the rest could be paid in installments. When after demonetization the demand plummeted they approached the Noida Authority to take back that portion of the land for which they have not been able to pay installments and allow them to retain part of the land proportional to what they have paid. The Noida Authority was ruthless  and sent them back saying that they will get back only 5 Crores irrespective of whether they have paid 100 Crores or 500 Crores in installment and will not get any proportional retention of land. He said that most of the builders are suffering from this liability and are somehow trying to pay whatever installments possible so that they not lose all the money deposited. Again, this approach of the government goes beyond my comprehension.

CREDAI is the most popular  industry guild of the Noida Builders. The membership of CREDAI has fallen down from a vibrant 300 to a stuttering 80 currently in the NOIDA region.

It is high time that the Government acknowledge the contribution made by the Noida Builders and reinforce their entrepreneurship. The government needs to take two important steps to bring growth back to the industry.

            1)              Infuse strong liquidity into the segment based on collateral provided by the builders without asking for theoretical and unfounded dictum of the Basel norms.  I am not here saying that these funds should be disbursed without proper control. The system set up by RERA is sound and should be fully enforced for utilization of the funds. In  the older projects also, which are not under the purview of  RERA, the recommendations of RERA should  be followed. Many of the norms followed by the banking system are not practical. Like for eg: If a B2B outstanding is not recovered within 90 days the RBI. instructs the banks to declare the supplier of the material NPA rather than declaring the buyer( who is not able to make timely payments) as NPA. 

Kindly note that the RERA Act has ensured that the funds belonging to a particular project either deposited by the customer or the bank is not diverted to any other sources by routing the funds through an mandatory ESCROW account.

            2)      Bring down the lending interest rates for home loan and construction loans to around 4%. Drastic times call for drastic measures. If lending rates for builders and home buyers are brought down to 4% the EMI per lakh would come down drastically and there would be a spur in demand which will take care of everything else. After all, it is the responsibility of the government to spur demand. Right? ( I have written more about why reducing interest rates in the most important step to grow our nation here.)

      

I just hope and pray that this economy should realize  the importance of the Construction sector. A vibrant and competitive construction sector symbolizes growth, energy and movement in the economy.

It is important to lower the interest rates in India as we are a nation of 130 crore people. We need to give more thrust on human talent rather than be worried about how the rich will become richer by keeping the interest rates high. As a society we will be happier if our children are able to afford to buy their homes a year or two earlier than wait till a time when their salary can afford to buy a 50 lakh home at a Rs 900 per lakh EMI. Now that we cannot reduce the simmering high cost of education will we not be a more satisfied lot if our children got that educational  loan at a lesser interest rate.

Finally, most importantly,  the companies involved in this industry are all Indian companies with very less external involvement. Their consumption of steel, cement, wooden items etc is mainly of local. So it is high time and more than appropriate that we take strong action to facilitate and push growth into this most important industry.