Real Estate Is Waiting To Be Disrupted

You began your journey at Mahindra Happinest, the affordable housing division. We saw some interesting propositions from the company at the time. What were some of your thoughts behind it?

I must begin by stating that, in many ways, I am an accidental real estate professional. I joined the company seven years back after a long stint in management consulting, where a bulk of my work was around technology. Moving into real estate was strange but it naturally had an impact on how I view the sector and what I wanted to do with Mahindra Lifespaces. Many times I would end up asking questions that may appear even silly but eventually it helped uncover many things.

You are right, I came in to lead the affordable housing business, which was a bridge to another leg of my previous work. This was about customers who had the means but did not have access to various product categories. This segment made business sense but individual companies found them unviable. We saw innovation in that space come from cross-sectoral collaborations and industry intersections. There was demand but supply did not meet it. I came to Mahindra with the single-minded goal to crack this consumer group. We were looking to create a category for the country as a whole with Mahindra leading the charge.
 
What were some of the early experiences in that objective?

At that time, it was evident that this sector was ready for disruption. In the last many decades, family behaviour, people’s lifestyles and ethnography have evolved but the design thinking from the supply side had not kept pace. In the production process, for example, the last major disruption in the space was cement and that was a century ago. We have not done any significant material or even a construction method innovation in a long time. Almost every aspect of real estate seems to be stuck in history. There was a need to make it contemporary from a proposition perspective, which was why was real estate important or what roles do homes play, and also from a delivery perspective of how do we construct better quality, faster, cheaper. Each of these was ripe for fresh thinking.

We hit some early success with these ideas in some of our first few launches. In one of the properties, for instance, we took out a proposition centred around maintenance cost. We said that in addition to what was otherwise promised in economic housing, we would also bring the maintenance cost down by half. We did this by embedding sustainability elements such as solar power, water saving and the likes, quantifying its impact on maintenance. It worked. There are several such examples where we lead this emotive and life-changing category with innovations.

This is on the residential side. Give us a sense also about the industrial parks, and how some of the plans on this change in the wake of changes in the sector.

We pioneered industrial parks. We set up the first one in Chennai almost two decades ago with a philosophy of livelihood (creating jobs), living (residential) and lives (social). This concept holds much promise. During the pandemic, Mahindra World Cities in Chennai and Jaipur were among the first to restart operations. The business continuity and ability to bounce back came to the fore and this was appreciated. This is a theme for the next few decades, of how we create resilient communities, living spaces and developments.

Give us a sense of some of your plans to be back on the growth trajectory, especially in the backdrop of the losses you have reported recently.

That is a fair critique; the losses have been more recent. Prior to the last two years, we were a profitable company. That was a period of external and internal reset. External factors are known but internally, we rethought where we were headed and what we sought to achieve. From a growth perspective, we were flat, and that is where we are now much more energised, committed and clear on where we want to be. Our cautious approach at that time paid off and we were not saddled with legacy issues. Our balance sheet is strong. We are almost a debt-free company.

Tectonic shifts are happening in both the demand and supply side and there lies the opportunity. If you looked at the classical parameters of land, labour and capital, the organised sector will steal a march. Land sellers are more cautious. This is one business, where capital is the raw material. By labour, I mean talent, and in this, the smartest are not putting up their hands to join the sector. But within that, players like us who have a conglomerate behind us attract the right talent. From a demand standpoint, customers have become risk-averse. From this perspective, our past may look chequered and flat but our future looks much brighter.
 
Your future strategy appears to be very focused in terms of markets, lands you want to buy or the turnaround time. What are your expectations from this?

There are two things to this. The economics of this business was once about buying cheap lands and building on that, hoping that as land price escalates, the properties will sell higher. This has changed today. The competitive advantage is in the conversion cycle. If we can do this faster, shave a year and some cost off, there is much more economic benefit. We need to hence buy land that is ready to market. We want land parcels of a certain size that comply with our overhead costs but do not need too much time to complete. Geographically, real estate is a local business. Most developers do well in their home markets. We have chosen to be only in two cities to build more depth and relevance to our customers. We are a small player and we want to be salient, and punch above our weight in brand recall. We expect this to drive our growth.