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Clawing back, brick by brick

Reza Kabul’s firm of architects reeled as the real estate sector took a beating during the downturn. What he learned from that experience, he says, will prove invaluable as things get slowly better. Lalatendu Mishra reports.

india Updated: Sep 03, 2009 01:28 IST
Lalatendu Mishra

Reza Kabul (49) has no time. He has to rush into a client meeting and then take an evening flight to Dubai.

Kabul, the proprietor and principal architect of ARK Consultants, an architectural firm, is back in action, riding the cusp of an upturn after eight months of a slowdown.

The recovery, he said, began since India voted in a stable government in May. “People are regaining confidence and the affordable housing segment has taken off in a big way. Our work is gaining momentum,” said Kabul who designed the 45-storey, 135-mt Shreepati Arcade at Nana Chowk, Mumbai’s tallest inhabited building (also India’s tallest, according to the Limca Book of Records 2003).

He said several of his clients have kicked off affordable housing and township projects that will keep him busy till other niche segments — like high-end housing, commercial and retail real estate — revive.

He is already working on the 88-storey, 301-mt Shreepati Skies at Tardeo, which will be one of India’s tallest residential buildings.

“Nobody is scared anymore. Things should normalise by the year-end,” Kabul said, exuding optimism.

Unlike China, he points out, India is a country of consumers. So, it recovers faster.

But the future didn’t always seem so bright. Like every businessman, Kabul suffered during the downturn.

The beginning
“It started in mid-September 2008. Forty per cent of our work stopped and the rest slowed to a snail’s pace. Even clients who were not affected became overcautious,” said Kabul.

His firm struggled as cash collections from clients dropped to a third of what was owed. “Clients did not want to pay. Some used the slowdown as an excuse and we faced a severe liquidity crunch,” Kabul recalled.

Kabul, who employs over 100 people, was not prepared. The real estate sector was among the hardest hit with rates falling up to 40 per cent.

This had a domino effect on firms like ARK.

The liquidity crisis meant banks, fearing defaults, stopped lending. Revenues dropped and businessmen like Kabul found it difficult make ends meet.

“We immediately resorted to cost-cutting, curtailed operations, froze salaries, stopped recruiting and slashed overhead expenditure,” said Kabul.

Despite the drop in earnings, he paid Diwali bonuses to employees because he felt the previous year’s achievements entitled them to it.

The good in the bad
There was opportunity in the slowdown too. Kabul used it to think hard about his business and set up robust processes, not given that much importance earlier.

“We used to be casual about bill collections as payments would come automatically. There was so much work, I never though clients would default. Now we have put our back-office in order and made it a practice to take advance payments and get payment terms signed before starting work,” he said.

“We were not as affected as the US and Europe, but we never expected this. The slowdown put a brake on reckless growth. Having suffered, the slowdown prepared us to face worse times,” Kabul said.

The bright spot
All that, though, is in the past. Kabul is now preparing to hire more people and his staff is likely to get a 10 per cent raise. The slowdown, he pointed out, has made available high-quality professionals who are willing to come aboard at reasonable salaries. “There is huge scope to grow,” said Kabul. “I will concentrate on what I am good at.”

He is not alone in his optimism. A survey by UPS, the world’s largest package delivery company and a global leader in freight services, showed that small and medium-sized enterprises (less than 250 employees) in India have a more positive outlook towards business prospects than their regional counterparts.

“While they have been affected by the meltdown and are facing a number of obstacles, they are confident of bouncing back,” said Derek Woodward, President, UPS (Asia-Pacific).

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