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August 2015 Interview

Published on: 2015-08-17 13:02:09     2282 times read    0  Comments
“We consider this (the earthquake) as an opportunity”

Bijay Rajbhandary is the Chairman/Managing Director of CE, a conglomerate of companies with investments in several sectors such as construction, real estate, engineering consultancy,  industries, trading, finance, education and health. Rajbhandary has over two decades of experience in construction. Akhilesh Tripathi talked with him about the post-earthquake situation of the real estate and housing sector, viable building materials, and people’s fear of high-rises, among other issues. Excerpts:

What’s the situation of the housing industry after the earthquake?
As far as apartments are concerned, a detailed assessment is being carried out as per the government norms. Until we get the report, we cannot to say what the situation is. Some of the buildings may require retrofitting while others may need only minor repairs.

In the meantime, many apartment owners have already started living in buildings that were given a yellow sticker – deemed safe for occupation.  

Immediately after the quake, people were afraid of going back into the high-rise apartments because of the cracks that developed on the walls, but these cracks did not affect the structural integrity of the building – but rather only the infill brick walls and plaster that were damaged.

Thanks to experts and the media, people are now quite confident that they can still live in their apartments despite the cracks.

As far as new apartments, developers should watch and get a feel about the feasibility for apartments for the next 6-7 months. For now, considering the psychological state of the public, developers should opt for mid-rises (8-10) floors. The ability to undertake new apartment projects greatly depends on whether the developer is willing to take the risk or not.

I believe this is the opportune moment for people with surplus amounts of funds to invest in apartments as they shall be able to buy units at a reasonable price. The approval for newer housing projects might take a couple of months after which it shall still take 3-5 years to complete. Investors can get good returns for their apartments during this period as well as later when the apartments pick up again.

There are many people living in the core areas of Kathmandu, Bhaktapur and Patan who want to move out because their houses have been partially or completely damaged in the quake. Earlier, these people were reluctant to move to another area because of the long connections they had with their homes. But after the quake, they have a good reason to move. Housing industry has good prospects because the price of land is on the rise and developers buys land in bulk at a cheaper price.

To add to that, there are other people who want to live in apartments and stand alone houses developed by the developers. The developers are offering around 200 units a year. That is nothing compared to the demand. So, the demand is there. It all depends on the government’s new regulations and amendments to the existing bylaws, which we are still waiting for.

Bijay RajbhandarySome people are saying that the demand for mid-rise apartments is going to slow down for a few months. Some are saying it might even do so for a year. It is true that none of the tall buildings collapsed in Kathmandu, nobody died, and they structures are safe.  It seems that the damage is more psychological than physical. So, what do you need to do to get rid of this fear among the people?
Actually this is where the media and professional people play a crucial role. They must continuously educate the people and making them aware of the facts – that apartments are built with earthquake safety factor of 8 and above on the Richter scale and is engineered product. This is why you will find many of our clients have returned to their high-rise homes we have constructed.  

The added benefit of having people occupy apartments in this period is that their friends and relatives visit. These visitors will realize the comfort and the available amenities provided, as well as how safe the buildings truly are – this shall eventually make a greater number of people feel for secure and confident in high-rises.

To what extent did the quake damage CE’s projects?
There was no real damage done because all the buildings have been designed to withstand earthquakes of up to 8 Richter scale. As far as under-construction projects are concerned, some fresh masonry walls that were built just before the earthquake have collapsed.

Other than that, all the buildings are safe. In fact, our clients are so happy that they call us to tell us that they feel lucky to be living in our buildings. We constructed the tallest apartment building in the country. Besides some minor cracks on the walls everything is okay.

Has the quake affected the number of people coming to CE to buy apartments/ independent units?
Absolutely. There is a high demand for our independent units because of our past history – we have completed more than 260 projects and developed 2,000 housing units and apartments.

If people want to move out of their damaged houses, then they need to buy a new house. Where will they go? They will go to the developers. And we are one of best in the business. After the quake, around 700 people have shown interest in our units.

CE has earned a reputation in this sector over the years, but other builders might not be as comfortable in the current situation. They may see a slowdown in their business.
First of all, let me tell you why CE is in a comfortable position. It’s because we always had a very clear vision regarding the real estate sector. We recognized the real estate need of the country and came up with a complete solution. We have our own in house design firm, structural firm, geotechnical analysis division as well as our backbone, our construction company besides auxiliary companies in trading, building materials, industry, etc. We are an ISO-certified company. Our methodology, workmanship and testing mechanisms are all of a high standard.  Most of our engineering work is carried out by our own engineers, and our emphasis is always on quality control – from conception to the handover of a project. We plan, monitor and control projects with the application of latest management tools.

Unfortunately, I don’t think any of the other developer has this kind of a set-up. That is why they need to rely on different agencies. Any shortcomings on the part of any of the agencies involved will have an adverse impact on the final product.

The government too is very anxious about urban development. However, the temporary policies the government and the municipalities have come up with, as a reaction to the quake has had the negative impact of creating panic in the real estate sector. The government is making amendments to its building regulations, which is not necessarily a negative thing. However, until these regulations have been finalized, the government has put all new project proposals on hold, which is a major setback to the real estate industry.

This policy change has definitely delayed our upcoming projects as well and greatly impacts those developers who have already acquired land. Waiting for the government’s decision translates to ever-increasing costs. Almost 60% of the project cost would have been funded by a bank, and the bank needs to be paid interest on the loan it sanctions. All this extra cost will be passed down to the consumers. Due to this, we fear that people who would have otherwise moved to new houses will be deprived of housing due to budget constraints.

The government must realize, if people continue to live in damaged houses, there might be accidents. The government should take this issue seriously and provide the amended policies as early as possible.

Bijay RajbhandaryIs CE contemplating the possibility of a new project?
Yes, of course we are. We consider this (the earthquake) as a type of opportunity. Although it was devastating that the earthquake happened in our country, and many people lost their lives and property, as I previously mentioned, there is a demand for 700 houses. So we are working on new projects. We are just waiting for the government’s signal to go ahead.

Let’s slightly change the topic, you are also known as a ‘spiritual entrepreneur’ and you have a meditation hall in your office. So what connection do you find between spirituality and entrepreneurship?
Spirituality and entrepreneurship complement each other. Spirituality helps you see things clearly and do the right things in the right way. It also helps you become a focused person who is better equipped to overcome fear and handle issues effectively and efficiently.  It develops compassion and forgiveness and when you do business with all these qualities, people feel comfortable and you as a combination of these qualities, become highly productive. When you are doing the right thing, you don’t feel that much stress. Even if there is stress, it can be well managed with meditation.

Would you say that meditation had some role to play in your success?
Meditation provides clear guidance. Even if you make a mistake, it will help you realize your mistake and avoid it from then on. On many occasions, it will help you dissolve your ego. When your ego is dissolved, how can people not like you? That is the reason why we say that we don’t have competitors, we have colleagues only.

In one of your recent articles, you mentioned that we could introduce new technology in construction? Could you please elaborate on that?
The thing is that if you want to build a high-rise building, structural steel might be a very good alternative to the materials we use these days. For large spanned column free structures, we could introduce post tensioned slabs. There are other building materials like dry-wall partition that can also be used. Many manufacturers from India have already introduced these products in Nepal.  Not only should we try to change the technology, but also our workmanship so that the building process becomes cheaper and faster.

Do you mean that it’s time we considered alternatives to bricks and mortar?
Obviously,  from an environmental point of view, bricks are not good. The material is environmentally friendly, but the methods used to produce bricks are not. So we do need to seek alternatives, and there are plenty of alternatives available such as compressed earth block, cement bricks, and hollow blocks.

Besides construction, CE is also involved in other sectors like education and health. How are things in these sectors?
Actually CE’s business model can be summed up in one acronym: ‘CHIEF’.

 ‘C’ stands for construction, consultancy and consumer products; ‘H’ is for health and hospitality; ‘I’ is for industry; ‘E’ for Education, and ‘F’ for financial institutions. Although we are a young group, we have initiated about 27 ventures so far.

We are making significant progress in all aspects. It’s been 23 years since we started. Our architecture firm is one of the biggest in the country. We have a structural design company which has the most number of employees. We are doing significantly well in trading sector where we import many branded materials.

We are coming up with a number of green products. We have an aggregate crusher factory. We manufacture architectural landscaping tiles. We also run a metal fabrication industry and a hydro-mechanical fabrication industry. We are the co-founder of Grande International Hospital, which is a doing well--it served very well during the earthquake. Our ventures are making progress and we are very happy with them.

In the financial sector, Vibor Bank is also catching up now. We are promoting entrepreneurship and helping entrepreneurs start up businesses via the Grand Holdings as well. We are operating beyond our borders too, in Doha and Bhutan. As far as the progress of all these ventures is concerned, we are very happy and our strategic partnership model has worked out very well. Our economic model of diversifying integrated concepts is proving to be right.

Back to real estate, some people are saying that the price of land will go up in Kathmandu and apartments down. Do you agree with this prediction?
It may be right; it will depend on a number of factors. For example, if a builder is unable to complete an apartment, the builder will have to carry a lot of financial burden such as interests as well as payback of bank loans. This might force the developer to sell apartments at a cheaper price.

But if the building is completed, then obviously the developer needn’t invest anymore and can possibly retain major units for a longer period of time to sell at their price. It is anticipated that the price of the land might go up by as much as 30% after sometime. I think the building cost shall also shoot up. The completed projects gain the advantage of having a comfortable mark-up.  Consequently, the cost of capital will be much higher than what it is now. If you don’t have funds, and if you cannot sustain the project, developer are forced to sale their units at cheaper prices. But if you have funds, the price will not fall. And then for completed projects, you can hike the price justifying that the cost of building materials has gone up significantly.  

Is there anything else you would like to add?
What I believe is that the country is in need of good leadership. We can re-build Nepal provided the government has a clear-cut policy. People around the world are sympathetic to Nepal’s plight and they have always been nice to Nepal. Now it is time we cashed in on this feeling by means of FDI (Foreign Direct Investment). All this is possible if we have good policies and good governance. I wish that we get a constitution soon and the government established – one who gives priority to FDI so that we can undertake mega-scale projects.


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