No matter you are an IIM graduate or the youngest Executive Director at Nomura, it is never easy to leave your comfort zone and start a new venture. However, when you are equipped with rich experience and a sound knowledge of your domain coupled with a zeal to enrich others, the path becomes less bumpy. So is the case with Tanuj Shori, Founder, and CEO, SquareYards. Tanuj has an experience of more than 8 years in Capital Markets (Equities) where he worked with some of the global leaders in this field. During his tenure with Standard Chartered Bank, Lehman Brothers, and Nomura, Tanuj used to track the Asia Pacific & US markets and, gradually, acquired specialization in these regions. Tanuj has been a fast achiever throughout, and apart from strong educational pedigree, he rose to become one of the youngest Executive Directors in Nomura. An Indian Institute of Management (IIM) graduate, and following the legends of his Alma meters, Tanuj eventually decided to leave aside a highly lucrative job in equities.
Today, Tanuj is steadily building a highly successful venture. In the short time of its existence, Square Yards has become one of the most diversified and trusted Real Estate Consultant around the world. Here are some of the excerpts of Team RealtyMyths’ conversation with Tanuj about his entrepreneurial journey and the future outlook.
Your company successfully raised USD$10 million from multiple investors in the form of convertible notes in January 2017. How difficult was it to continue the momentum for rest of the months, considering the implementation of GST in July and other reformatory announcements that could have impacted your business?
Big-time reforms like GST & RERA had caused some initial discomfort in a large sector which is pegged at US$165 billion. But overall it had a positive influence on our business as the Industry started to consolidate and moved towards an organized play. In the last one year, we have been able to grow significantly and consolidate our position as the largest market share holder in the Indian primary residential market. Currently, we have an annualized revenue run rate of ~USD30million, with ~1500+ transactions per month. To add to its pole position in real estate aggregation, we are also one of the largest mortgage distributors in India, with monthly loan disbursals worth USD40-50mn. Besides creating an organization with stable and strong processes – 2000 employees and a presence in 42 cities across 10 countries. We are focused on surpassing USD 1 billion in GTV annual run rate in 2018. In terms of market share, we are looking at capturing 15 – 20% share in the primary residential sales market in the country over the next few years.
Well, having a professional relationship with more than 500 A-grade developers and working closely with global companies, can you briefly explain how global brands perceive the Indian real estate market? Do you think opening up the FDI in retail is a game-changer for the Indian commercial market?
There is a massive change in global investor outlook towards the real estate sector in India. After the massive reformatory steps like demonetization, RERA, and GST, the global community is much more confident about the administrative commitment and willpower towards making India a clean, corruption-free, business-friendly and forward-looking economy. As per the World Bank’s Doing Business report 2018, India was one of the top 10 economies and the only large economy that has improved the most in 2016/17 with as many as eight large-scale reforms.
The growing interest of global institutional investors, coupled with the exceptional 94% returns generated by the NSE Realty Index this year, are some of the positive signs that corroborate towards the changing outlook. After Private Equity (PE) funds, sovereign wealth funds and pension funds have become the second largest stream of capital inflow into the sector.
Though having some of the costliest commercial complexes globally, the Indian commercial real estate has been off the track in last 10-12 quarters. Could a better planning and execution of REITs correct the market? What do you think is the reason for a ‘not-so-fast’ growth of REITs in India?
It is true that Indian cities like Mumbai and Delhi are amongst the most expensive commercial real estate markets. That’s where the dilemma begins. In order to make sense to investors, REITs have to produce at least 2-3% returns more than that of those produced by government securities and bank deposits. Countries such as Singapore, Australia, and Japan which are the forerunners in the global REITs market generate an average yield that is 3.5-4.5% above the 10-year government bonds.
However, in India, the average rental returns hover between 4-6% a year. The Fixed Deposit (FD) interest rates are currently pegged at 5.5-7%. REITs in India, therefore, have to generate at least 10% returns in order to attract investors and that looks to be a big challenge.
The year 2017 witnessed some of the biggest policy related reforms in India, particularly the real estate sector. With a year away from the general elections, do you think the year 2018 would be more populist in nature or will carry forward the same trends?
After introducing major reforms such as Benami Act, demonetization, RERA and GST, the government has reiterated its commitment to further take transformational steps. Linking Aadhar with property would be mandatory; another step towards diverting the parallel economy towards the mainstream economy. I don’t expect any populist measures in the light of forthcoming elections, per se, however, the government may expect tangible returns out of its painstaking efforts to take India’s economy to its rightful place. In the end, if all such measures result in a winning customer, the sector will win by itself.
Having worked with the likes of StanChart, Lehman Brothers, and Nomura, you must have acquired a fair understanding of how the real estate market behaves. How difficult it was for you to decide the switch from Nomura to something of your own such as Square Yard?
At the onset, it was our personal experience with the asymmetry that existed in the Indian real estate market that led us into starting Square Yards. To add, we were truly nonplussed at how large this market opportunity was (is) and no one had tried (or had succeeded) in organizing the industry. From that initial stage, through our growth journey, the motivation and the driving force continues to evolve with the business. Today, our greatest inspiration is to scale the business to such a level that this scale starts creating value for all stakeholders. We want everyone – from developers, broker partners, the customers and our sales agents to grow and flourish with us. Creating that kind and amount of ecosystem, which could impact thousands of lives around us has been driving us every single day.