Properties, Homes & more

<< Jerry Rao’s interview on creating low cost housing the professional way

Jerry Rao, founder of IT firm Mphasis, wants to deliver low-cost good-quality homes to buyers like drivers, housemaids, plumbers and electricians. Jerry Rao’s new venture, Value and Budget Housing Development Corporation, is targeting building a million homes in 10 years in 17 cities. Excerpts of an exclusive interview with ET, Jerry Rao (JR) defends his new mantra…

Interviewer (I): How will you address the backend challenges? Your buyers constitute the unbanked part of the population!!

JR: There are two big demand-side challenges. One, unlike in Manila and Sao Paolo, where poor and rich neighbourhoods are far away, in Indian cities, the poor live inside the city. Now, we are giving them housing far away. So, there is a commute cost and a commute time. That is a demand-side dampener.

The second is they may want to buy but how many of them will qualify for a loan. That certainly reduces the size of the market. But, believe me, these people have the ability to downpay Rs. 50,000 to Rs. 1.5 lakh. These people live frugally and save a lot. Over time, we believe the system will be in a position to offer 15-year mortgages in the Rs 2-8 lakh range.

I: What is your assessment of the buyer profile?

JR: They may be poor but they are upwardly mobile - these are NOT the absolute destitutes or the pavement dwellers. What they want is to get out of their present shanty / to a more secure place. They want compound walls, security, indoor toilet and privacy. Most want their children to go to English medium schools. The target buyer is someone, who has an income and also high labour mobility so that even if he moves to the city outskirts, he would get a replacement job pretty quickly. Like a driver or high-skilled construction worker.

--- As told to the Economic Times ---

As more and more people flock to metropolis (for whatever reasons), the stress on its housing resources is multiplying and the direct impact is on accommodation. A significant part of our income in any metropolis is spent on the living: house rent if you’re living on rent or maintenance if you own a home. Typically many people tend to live on rent and this tendency has given rise to a whole new business: renting out. A few years back, renting out was not a big deal. You just need to decide on the locality and the budget you can afford and you will easily get a nice house. However things have changed after incidences of terrorist attacks.

I would not go in depth about the terrorism, but investigations revealed that these terrorists have rented out places in the metropolis and managed to get unnoticed. Hence, it was recommended that everyone who wants to rent a property must undergo police verification. Well, this is a good move, but not always practical. The most important question is: how would you find good people to rent your property out? I am sure you will not simply rent it out to anyone. After all, it’s YOUR home and you’d like it to remain as lovely as you’d keep it yourself.

Hence, it is quite important to find out good people to give your house on rent. That’s where GoRenter will help you out. Once you subscribe by paying a small fee and specifying details of your property and what type of people you’re looking for and the budget, GoRenter will match with its extensive database and provide you notifications whenever a suitable match is found. It also acts as a middle-man in sorting out differences, if any, between the two parties. It will also take care of the police formalities and will ensure that the rent agreement and other procedures are done hassle-free. True that this is, for the time being, limited to Arizona Property Management, I am sure it will soon expand to other locations. If you would recollect, GoRenter was in a big mess earlier with lot of unresolved disputes between previous owner and customers. However, it has now undergone lot of restructuring and the new management is quite promising, determined, focused, and supportive. I have gone through GoRenter.com Reviews and I must say that it offers good quality service at very affordable rates. I have not faced any issues / disputes with them and am sure no one will. If you’re looking for Homes for rent in Arizona, GoRenter is THE place. If I have to say my opinion, just go for it…

Jerry Rao, founder of IT firm Mphasis, is completely immersed into his next business innings: Nano housing. Just like the Nano car, he wants to deliver homes to buyers looking for affordable homes: including drivers, housemaids, plumbers and electricians. Jerry Rao’s new venture, Value and Budget Housing Development Corporation, is targeting building a million homes in 10 years in 17 cities.

In an exclusive interview to Economic Times, Jerry Rao said, unlike conventional developers, his business model would treat land as an inventory and not a capital asset. If he is able to roll out his project and deliver in 12-18 months, the returns would be in the region of 30-40% almost similar to what the IT industry enjoyed in its dream run. Excerpts from the interview:

Interviewer (I): After IT, banking and angel investing, what made you think of housing?

Jerry Rao (JR): I could retire and do nothing. At 57, I have got at least another 5 to 10 years to do something else. I did want to stay away from IT and banking and wanted to do something of scale. I looked at agribusiness, education, health care and it seemed to me that I could leverage my IT and project management skills in housing. And, there was no paucity of demand. So, you could scale this business and create a big impact.

I: What is the difference between your business model and how conventional realty operates?

JR: Unlike conventional realty, we want to think of land as inventory and want to sell it as soon as we can. That is the basic difference that sets us apart. I thought it would be a high risk model. But, the downside here is very low. We are using equity to buy land. We will have access to construction finance and then we also get 25% down payments from buyers. So, even if the project goes bust, we can still repay all the loans and also repay equity. But, if we get it right and build and sell the project in 12-18 months, then the return on equity will be in the 30-40% range. It is actually quite an attractive place to be in.

I: Then, how come nobody else has entered the space?

JR: Why did nobody create a low-cost detergent before Nirma? The high-cost market was profitable enough. One, it is partly a supply side problem that people do not re-engineer. Two, the middle-class and upper-class segment, Rs 0.50-1 crore, has been very profitable. Three, if you are looking at land as a capital asset, you would not do it. This model requires a mindset shift.

Do not forget to read PART 2 of the interview…

At around 5:30am on June 30, an unoccupied building still under construction at Palm Beach Road in the New Mumbai district of Mumbai city Shanghai and not Sanpada (Please read UPDATE published below) toppled over. One worker was killed. According to information, a 70 meter section of the flood prevention wall in nearby Creek Stream which connects with Arabian Sea collapsed that may have something to do with this building collapse.

God bless all who have and are suffering in this accident…

Please note that I have received this information through a mail, so I am not responsible if this information is incorrect. If you have latest update on this, please post it here and I would certainly publish it. Let’s spread only the right information.

UPDATE: I have received many comments from alert readers who have pointed out that this information is partly correct. This accident had really took place, but in Shanghai (check this BBC link) and NOT in Sanpada as reported by me. I apologize for the wrong information I had published. I am against spreading any rumours so I am taking all precautions to avoid such things to happen, and also upading my post. Thanks again to my alert readers.

The much awaited garden on top of Parsik Hill in Belapur (Navi Mumbai) will finally be thrown open to the public on Wednesday, June 17. This garden is spread across a generous 4,000-sq mt expanse built on top of a new water reservoir on the hill.  It will be inaugurated by NCP chief Sharad Pawar.

Offering a breathtaking panoramic view of the entire satellite city, the garden is already being referred to as the ‘Hanging Gardens of Navi Mumbai’. With Navi Mumbai slowly becoming a concrete jungle, the garden is surely going be a welcome change. There are also planns to set up telescopes along the periphery of the garden.

According to the city engineer of the Navi Mumbai Municipal Corporation (NMMC), Mohan Dagaonkar, the reservoir below the garden is part of the Kalamboli-Digha pipeline project, which was undertaken by the NMMC along with Pratibha Industries to ensure an uninterrupted supply of water to the city. This spot was chosen because it is one of the highest in the city. The water that will be brought here from Morbe Dam will be transported through the new pipes mostly by gravity, thus saving a lot of electricity. The water tank will handle nearly 32 million litres of water every day, and will supply the same to various parts of the city.

According to the developer of the garden, it will have drooping creepers and a waterfall, which will add to its beauty. Apart from the high vantage point, from where we will get a lovely view of the city, the garden will be useful for morning walkers and fitness buffs.