"We need to think about this in a very clear manner as to what will be the impact on the existing practices, what will be the impact on farmers who also may have invested what they have already sold. They may have invested the monies and their may come after a few years, because as the process is outlined in the bill, it may take anywhere from 4-5 years and therefore the holding power and therefore, consequently the supply of raw stock, land coming into greater urbanisation may get affected," explains Talwar.
Additionally, Talwar says that the company continues to be focused on monetizing its non-core assets in order to pare its debt.
Below is the edited transcript of Talwar's interview to CNBC-TV18.
Q: How does it hurt real estate companies itself? Would your land acquisition plans get way more expensive now?
A: We are still studying the Land Acquisition Bill as it was introduced. It is about 55 pages long, but the amendments to that itself are about 26 pages long. I think before one can come to any conclusion, one will have to do an in-depth study of the meaning and the implications of it.
As a principle, no one has any dispute on paying fair compensation to the land owner. It is acceptable right across the board.
Firstly, the fair compensation as we know it with the 100 percent consent of all the stakeholders and at the best and fair market value is what is a willing buyer-willing seller agreement. This should be taken into account even now when rules are being framed because this is what gives the best returns to the farmer. Yes, it was the lack of a fair value being given to the stakeholder or landowner which was in question and therefore demanded that a 100-year plus old act needs to be redrafted and changed.
Q: Were your land acquisition so far by private companies where at the moment they are asking for 80 percent consent, at the moment how is it done? Is 80 percent consent not taken?
A: A 100 percent consent is taken when you have a willing buyer-willing seller. We were getting land only by two methods, one was of course directly from the farmer, the other one was through auctions. That is what will now get impacted because cost of available land either with the companies which they own already, and that which they are going to get in auctions from government controlled institutions will of course go up in value because government also auctions these in a transparent manner.
However, there are lots of schemes and master plans in various parts of the country which are under implementation where people have already invested. What will happen to those areas where laying off services, maybe external development charges, laying of sewerage services, drainage service, electricity lines and small buildings like sub-stations. What will happen? Are we starting afresh or is there a carving out proposal given?
Q: If in case there is a retrospective clause, if in case your land deals are not consummated do you then expect land prices to hike or to increase because on those deals which are still not done and hence an increased outflow for DLF on those certain projects?
A: It is not on DLF. I think it is on all the existing companies and future proposals. Even those which are not consummated may not come under this if they are private sector willing buyer-willing seller under the provisions which allow you go to in for 50 or 100 acres and below.
Q: We spoke to a team of lawyers earlier and they were saying that it is quite possible that the state governments will not implement it at all, some state governments may not implement it. Do you think that could be an issue? If the state governments do not play along then life will not change much for real estate companies?
A: I am glad that you are asking only about real estate companies, maybe that is the focus, but I think it will affect every kind of industry. Real estate and urbanisation which is already going on, may get impacted and therefore prices of available land and stock which is available may also see an increase and greater returns to companies which already own land.
Q: What is the stock of land you have since you expect that that is going to be the incidental gain for real estate companies?
A: It is not only with us or with other real estate companies, it is with other industries. We need to think about this in a very clear manner that what will be the impact on practices, what will be the impact on farmers who also may have invested what they have already sold.
They may have invested the monies and their may come after a few years, because as the process is outlined in the bill, it may take anywhere from 4-5 years and therefore the holding power and therefore, consequently the supply of raw stock, land coming into greater urbanisation may get affected. All those economic principles will have to be seen.
Q: While declaring your first quarter numbers you had indicated that the land capex estimates that you have, your guidance for the year is Rs 500-600 crore per year. Would that be increased by DLF or would you estimate it will fetch much less?
A: I think we will have to relook that. Yes, we already have enough land. Even on a 20-year principal, we have land already with us where we can go ahead and plan projects and which will be finished in the due course of time giving us perhaps the better returns.
Q: Considering that there could be a spike in real estate prices because of the bill would you look to monetise a large part of your land bank because of more lucrative rates?
A: No, our principle is not to monetise land and thereby earn money. The idea was that a non-core asset should be monetised, so that is reduced. After all, we are in the business of providing housing, retail, office and IT space to industry. So, I think we would go along our core business as we go along in future and not simply earn money by selling land parcels.
Q: Will you be able to pass on prices to your present consumer or do you think given the demand environment real estate companies like yours may take a hit in the margins?
A: There will be no doubt a greater return on landholdings which are already under the belt and passing on prices is purely a market based phenomenon which we would not like to capitalise on, we always give the best product as well as best market price and we would like to keep it that way. It would not be that an artificial hike will take place. I do not think that is the principle on which we work. We have been here for 66 years and we depend on our customers coming back to us again and again for getting the best product at the best market price.
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