Real estate demand from industries is seeing a steep rise: Arun Nanda

After working for 50 years in various capacities in the Mahindra group, Arun Nanda retired as the Chairman of Mahindra Lifespaces last week. Apart from working as director on the Mahindra & Mahindra board, Nanda set up 17 businesses for the group including the real estate, hospitality and infrastructure business. In an interview with Dev Chatterjee, Nanda talks about the future of the Mahindra group and its various businesses.

You steered both the real estate and hospitality business at a very tough time of Covid. What’s your take on both industries?

Both residential and hospitality were one of the first few industries to bounce back and we are now seeing demand even higher than in the pre-Covid levels. Post-Covid, there is a higher realisation of having better quality homes. The work from home has further added to the demand. We have also seen easing of input costs, return of migrant labour and interest rates continuing to be affordable. All these will augur well for the real estate company in the future.

As far as hospitality is concerned, the demand for holiday destination-based resorts have skyrocketed. This, along with the desire to spend time with family has given Mahindra Holidays the highest occupancies in their resorts at nearly 90 per cent. There are two new sources – workation, where guests instead of working from home, work from a holiday destination, and daycations, which are spending a day with family at a resort closer to home.

These factors are reflected in the best ever turnover and profits of Mahindra Holidays & Resorts in the quarter ended June this year.

What’s your views on the Indian real estate sector and Mahindra Lifespaces role in it?

I personally feel that the company is in a very strong position and absolutely ready to move into its next orbit. Strong balance sheet, net zero debt at standalone level and only Rs 60 crore of net zero debt at consolidated level when most of the real estate companies are struggling to service debt.

We have a good residential land bank, together with a strong pipeline for new projects. Besides 70 acres of prime land in Thane which was acquired more than a decade ago for an infotech special economic zone now being converted to residential. In addition, there is a huge land bank for integrated city development, to name a few – 1300 acres of land in Murud near Alibaug acquired many years ago, 1500 acres of land in Chennai, Jaipur and near Ahmedabad at historical cost, which is at just a fraction of the current selling prices.

We are also acquiring land near Pune for a new project, and of this 500 acres of land is already acquired.

The other important development is that after more than a decade we are seeing a steep rise in demand for industrial land and that is reflected in the results of Mahindra World cities. The company is also considering investments in logistic parks.

You are retiring from Mahindra Lifespaces at a time when the real estate sector is just picking up pieces after two years of Covid. Don’t you think the company needs leadership at this crucial juncture?

There are two reasons, one is personal – that is to spend time in the social sector. My passion is to work with senior citizens and the upskill of youth, and that is why I resigned as director and president of Mahindra & Mahindra in 2012. Now I want to expand the activities of my charitable trusts to include senior living and geriatric care. The Mahindra group gave an opportunity to an accountant-cum-company secretary to start and manage several businesses, primarily in the services sector and I was able to achieve what I did only because of the encouragement and trust former chairman Keshub Mahindra and current chairman Anand Mahindra had in me.

Besides, Mahindra Lifespaces has a strong management which I am confident will take the company to even greater heights. As a non-executive chairman, besides my statutory responsibilities like governance, compliance, monitoring performance, etc, I was performing the role of an intrapreneur also. The company needs to move from ideation, conceptualization and planning to execution and this is the time is right to leave.

The special economic zones were supposed to be a big business opportunity for the company. Do you think the SEZs set up by Mahindra is a success story?

We were the first company to set up a SEZ under the PPP mode at Chennai followed by another one at Jaipur.

Mahindra World City at Chennai was the most difficult project that I ever did. Starting with acquisition of large parcels of land at most difficult times when an agitation was going on in West Bengal. After we spent a huge amount of time and effort in the development of MWC, there were no customers due to the economic slowdown and the focus of Indian companies then was on increasing productivity rather than expansion. Ours was a greenfield location with high land cost. But Infosys chairman N R Narayana Murthy agreed to join the project saying this is the future and Infosys should be a part of the future. With Infosys as an anchor, we had no problems in getting customers. Later, the Rajasthan government invited us to set up the Mahindra World City in Jaipur. Here again, Infosys was our anchor and this project has been hugely successful.

The last decade was not the best for expansion at new locations. But we are now seeing a good demand and it is reflected in the results of Mahindra World Cities for the last two quarters.