In urban infra, we’ve failed, says K P Singh


Kushal Pal Singh is transitioning from being the chairman of DLF, India’s largest real estate developer, to being the chairman emeritus. In a 75-minute interview with TOI, Singh discussed the failure of urbanisation policy, his relationship with the Gandhi family, including the controversial land deal with Robert Vadra, and the future of the real estate sector. Excerpts:
Since you have built this business, there must be a lot of attachment. Is there a sense of giving up, how does it feel?
Very nice. For me, this is not a change, frankly. My son (Rajiv Singh), has been the vice chairman. He looks after the company and I am only counselling and helping him. So, this is a very good transition. Since I crossed 90, it is befitting that the active responsibilities should be given to the young people. I will be chairman emeritus, which means till you live, you are attached.
Is this current crisis one of the worst crises that you have encountered in your business career?
Yes, I couldn’t see World War II, but I hear that you have not encountered this kind of phenomenon, which is not finished yet. It will be wrong to say things are hunky-dory as peaks will come, then we’ll go down. This will go on till you get a successful vaccine, which could easily be a year-and-a-half away.
How is it going to affect real estate and your business?
It will affect every business. Real Estate has always been affected earlier. It was never in a position, which in a country like India, it should have been in. All over the world, real estate means urban infrastructure, construction. This is the number one economic driver because it employs the largest number of skilled and unskilled people and it has a big multiplier effect on GDP. So, for a country of India’s size, demographically, it is the most important activity apart from agriculture.
In India, unfortunately, it has not yet occupied the place of eminence it should. You see the migration of people, look at the face of migrants. With bags on their heads, there are pregnant women walking miles to go home because they’re not satisfied with where they are working. Their living conditions are in a horrible mess. They live in abject poverty. They are living in subhuman condition in slums. All that is a result of urban infrastructure failure. If you don’t give a home with good living standards to these workers, they will revolt because today, there is television in every nook and corner. They see others are living so well.
How do you fix this?
Please take this recognition to the highest level in the government. We’ve gone wrong. Some great things have happened in India, but in urban infrastructure we have failed. You need to provide for proper settlement of migrant workers — proper housing, proper facilities and transportation link to the area where there is economic activity. This calls for a massive investment. Whether it is 10% or 20% of GDP, unless this is set right, you are going be in a big trouble.
The government left real estate development in Gurgaon and some other cities to the private sector, but development was not up to the mark. What is the solution?
Today, Gurgaon is not what was envisaged originally. I am the author of Gurgaon. It is my biggest regret. Rajiv Gandhi and Arun Nehru, very enlightened people, wanted us to develop a township in the most modern way. Everything, including roads and other infrastructure inside the township called inside development and outside infrastructure external development, including connectivity with the main city, Delhi, all had to be done by the private sector. A 16-lane highway was planned from Delhi, which is NH-8, and was developed as a six-lane highway. The 16-lane highway had to be done at our cost. There was a change in government in Haryana and it was hell bent in changing the way the development was to be done.
You have tried public sector, if it is so good why this mess all over India. This you guys realise that this urban land development was monopolised by nationalising it in 1957. DLF did work till that time superbly and developed a number of colonies in Delhi. After that, everything was public sector, but public sector couldn’t do it. No sector can do it alone.
What happened is that a new sector came up, which you call fly-by-night operators, and that is where all the mess happened — irregular buildings, slums and all — till Gurugram came. Even today, new cities will have to wait, give them a free hand. Yes, lay down the parameters for development. Entire on-site and off-site infrastructure must be done by one agency and not two, they must be held fully accountable, then you will see a situation without shortages.
This needs the radical restructuring of urbanisation policy of India, in which the public sector becomes the enabler, regulator and facilitator.
Are you willing to get into this affordable rental housing business that has been proposed by the government for migrants?
No, we won’t get into the business of affordable size for migrants. We are in a business, we do what product sells. Migrants are the responsibility of the government in every society. We see a market for smaller, compact apartments in future. It is for the government to make it more affordable by giving them very good mortgage rates, payable over a period of 30-40 years and covered by government insurance. Second, also give other incentives.
In India, the rental yield is 2% but the interest cost of money is eight to 10%. How can the rental housing market develop in the country?
Unless the government thinks properly, to make it attractive for a person to invest money in buying second, third, fourth, home. He can only do so provided he gets money at a very cheap rate over a long period. Number two, he has some tax incentives. Otherwise, nobody would invest. That’s why stock is not coming to the market.
When you started this business, land bank was a good thing but now it has become a liability because not much appreciation is happening.
No. Land bank is a liability if you borrow money. It is a depreciating asset. But a land bank is an asset if you buy without borrowing and smartly make your business. There are only two assets in the world — gold and land. Look at DLF, we are visionary. We have reduced our debt. We had a debt of more than Rs 20,000 crore, but we have now got the debt down by personal sacrifices. As promoters, we pumped in money through equity just to bring the debt down. You should hold the land because tomorrow when you go to buy land, you can’t buy land.
Residential sector is affected because of the delay in the completion of the projects…
Thank god, the government brought RERA and I admire and appreciate Prime Minister Modi for bringing discipline into this industry. This law was widely required 20-30 years back because the sector was dominated by vested interests, unauthorised developers. Because of RERA, malpractices will not happen in future and only people who are compliant will survive. The courts have also intervened. But for the unfinished projects, you need a bold policy.
There’s a large army of dissatisfied consumers, who have to be satisfied. Developers are in jail, look at Unitech. So, open this market to any enterprise which is profitable, paying good taxes and is well-governed. What is to be done is to complete the job to the specification, give them complete indemnity and allow them to offset the investment they make against their income. Give them three years to finish and then return the money to the bank.
You had a very good partnership with Jack Welch. How did it help your business?
History must give credit to me and Jack Welch for this. I was fortunate that I just got involved with the most high-tech company in the world at that time, GE. I had the privilege of knowing and learning from great people who were on the (GE) board with me. From that time, we knew the only way to do business is to get corporatised, do it properly, do it in a compliant manner. I learned a lot of things from Mr Welch. One day, I asked him what is the essence of the success and he told me: “the lessons learned by me from my past action or policy failures have always given me an opportunity to begin again, more intelligently”. I practice this in my life and the whole DLF team follows this.
Over the last few years, DLF has been involved in political controversies. A part of it has to do with the group’s association with the Gandhi family. How deep was your engagement with the family and are these attacks fair?
Highly unfair, highly misconceived. My essence of life is building relationships. We build relationships with every political party, regardless of who they are. It so happened that for a long time, Congress was the party in power. If Rajiv Gandhi was not there at that time, urbanisation of India would not have been like this. Gurgaon would not have happened. My association with Rajiv Gandhi was a short association. He was straight. He saw the future and thought that the private sector must come into urban development and he indeed encouraged that. I have no other affiliation. I’ve got a great relationship with this Lal, Banshi Lal, Bhajan Lal, Chhote Lal or the present government. Everybody is my friend. I admire the present government. It is God’s kindness, there is no better avtaar prime minister in India than Mr Modi. He had the guts to make a decision. He is well meaning and he is trying to shape India in a different direction. But whether you succeed or not, time will tell. Look at how he has handled Coronavirus and the way he has created awareness and sensitized people through the lockdown. He is right in opening up economic activity.
There have been questions about DLF’s dealings with Robert Vadra…
Again, totally misconceived. I have myself created may be 200 millionaires, may be more. There was a shortage of land. All development plans are in public domain. You just need a little intelligence to get one retired town planner, only nobody else and your own common sense as an entrepreneur. When you see the network of a township, the roads going out, commercial centres, any intelligent man will know that when the developer expands, he will expand in adjoining area. So smart people block the land, they buy in advance. They are called pockets. They sit on it. Now, this is a classic case of Mr Vadra’s two-acre land. It came around next to our shopping centre where the road had to pass through. We could have even paid him Rs 100 crore frankly, because we were making a Rs 200 crore profit from that. This is no rocket science.
One NRI in phase two had bought 15-20 blocks at Rs 10 lakhs an acre, we had to pay him Rs 3 crore an acre because if we didn’t take it up, our development could not take place. DLF does not do business with political people, but DLF does business with entrepreneurs, whoever it may be. It so happened Mr Vadra came in. We didn’t need his introduction to go to Haryana government. We were doing business with Haryana government already. What Mr Vadra does anywhere else I have no clue, but I can tell you, in our case, it is completely straightforward. We did some study because some inquiry was going on. For adjoining land, other people paid several crore more than what we had paid. So, it was made out into a hyped up issue. DLF does not need any political affiliation to do business.
How do you see this whole pandemic impacting the commercial real estate sector?
Covid will completely change the way we live our social life, the way we do business and how the market will develop. But these matters are for few years. Yes, people will start working from home quite a lot. But eventually, there is nothing like being in office. PM is doing very well so money will flow into India, from China. When enterprises come to India, you need offices.
Initially, there will be a dent for one-two years but eventually, people will start going back to malls.
Did the land acquisition act make life tougher for the private sector?
It is impossible to acquire land now, you can get one or two acres or five acres.



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