Realty hopes for infrastructure status, lower rates

 

The real estate and property development industry, hurting from the slowdown in the country’s economic growth, is hoping for lower interest rates and grant of infrastructure industry status to enable developers to access cheaper finance.

 

The industry is hoping that a stable government acting decisively would help not only to revive economic growth, but also look into specific problems faced by the industry.

 

“The Indian economy and the real estate sector have gone through multiple years of stress,” AnujPuri, chairman & country head of JLL India, said. “A change in sentiment is imminent now that a pro-business government with a clear mandate has been elected to power, so this is a very significant time for the industry. A general sense is that policy paralysis and indecisiveness are now things of the past,” he says.

 

According to him, the BJP has time and again given an indication of its willingness to adopt unprecedented reforms in areas such as taxation, housing and infrastructure, amongst others, which has raised high hopes in the real estate fraternity. For instance, the implementation of GST will make a huge difference for warehousing and logistics, and the new government’s focus on boosting tourism will give the hospitality sector a badly needed shot in the arm. “It goes without saying that the infrastructure segment is in for a major facelift, and this is nothing but good news for real estate,” he said.

 

“For real change, that could convert the scenario of shortage to surplus in housing units, we need an effective single window across the country,” said T Chitty Babu, chairman & CEO of Akshaya. “Further, the regulatory Bill has to be revisited. Government should come out with legislation that offers a level playing field to all the four key stakeholders of the industry, namely developers, financial institutions, government authorities and of course customers,” he added.

 

The real estate segment should see some reforms like infrastructure status being given to it to enable developers get access to loans at a cheaper rate and for longer tenures. Industry has also been asking for speedy approvals to cut delays in project execution and lessen the interest burden associated with it.

 

According to C Shekar Reddy, president of industry body Confederation of Real Estate Developers’ Associations of India (Credai), loans extended by the banks to the real estate sector are currently about 12 per cent of total loans. Of these, nine per cent are retail loans given to home buyers and the remaining three for developers amounting to about Rs 1.25 lakh crore. The latter should be increased more than three-fold to Rs 4 lakh crore.

 

The industry draws hope from the inclusion of ‘housing for all by 2022’ in the BJP manifesto. Towards achieving this, says Reddy, the government must cut down on various taxes in the sector and also cut home loan interest rates, maybe with an interest subvention of about three per cent. It should also remove the 4.9 per cent service tax, an added cost to the developers and is passed on to the home buyers, he said.

 

The shortfall in the housing segment has been around 18.78 million units, which is likely to be there for the next eight years. There are not many developers keen on taking up affordable housing projects due to thin margins, he said.

 

Now there is a requirement for a nod from the ministry of environment and forests for projects spanning more than 20,000 sq m, which is hindering progress and causing unnecessary interest burden on developers. This can be scrapped by evolving new building guidelines.

 

This has caused many a project in Maharashtra and other high density housing areas to be delayed, said Reddy.

 

According to Anshuman Magazine, CMD, CBRE South Asia, the initial expectations from the new government include an investor and reform-friendly government open to global as well as domestic investment opportunities. “The current liquidity crisis in the sector has been ongoing for the last couple of years and having overlapped with the present slowdown, it appears that much more pronounced,” he said. “As a result of the wider cash crunch plaguing the sector as a whole, developers have faced quite a few project delays too—including in the Noida and Faridabad areas,” he added.

 

RK Pachauri, TERI director-general said, “Environmental issues are often presented within the framework of conflict between environment and development. What is attempted here is a refreshing departure which provides a price tag on the damage that poor environmental quality and degradation is imposing on human society and how substantially lower-cost action can avoid this burden. What is included here are sectors largely within urban areas, but a similar analysis and presentation is essential for rural environmental degradation as well. Undoubtedly, that would be a far more complex challenge analytically, but given the large population in our villages, ignoring such analysis would be at the cost of ignoring the welfare of two-thirds of our population.”

 

Rajesh Krishnan, MD and CEO of Brick Eagle, said, “On the supply side, we wish for the government to streamline the lengthy approval process. The construction process requires 50-70 approvals and delays developments by two years on an average, a luxury that most social housing developments (defined as less than Rs 25 lakh per unit) cannot afford without the extra cost factoring into prices. Our hope is that the new government will institute a single-window clearance, in which one bureaucrat is responsible for our case, and can grant approval on behalf of all concerned parties.”

 

“Furthermore, we expect FDI regulations to be lessened in the affordable housing sector. Presently, the minimum possible investment is $5 million, capital which many developers in this sector cannot access. On the demand side, we would like to see more regulation on behalf of the end-user, who presently has very little protection while entering into an agreement with a developer,” he said.

 

Ganesh Vasudevan, CEO, IndiaProperty.com, said, “Specifically for the real estate industry, priority areas are infrastructure improvement projects and affordable housing projects. At a systemic level, steps towards improvement of transparency of the industry such as bringing in a regulator, improving speed of approvals by creating a single window process and enabling access to low-cost financing of infrastructure and affordable housing projects are critical enablers. One of the focus areas for BJP has always been development of road infrastructure. Their visionary project – ‘The Golden Quadrilateral’ would be taken to the next level and improved road connectivity with tier II and III cities would help the realty industry prosper in these cities.”

 

Babulal Varma, managing director, Omkar Realtors & Developers feels, the BJP has always been pro-development, with the focus largely on infrastructure development and real estate sector. Also, the party’s manifesto emphasised ‘urban upliftment’ in India by initiating building 100 new cities, twin cities and satellite towns. It also eyes providing low-cost housing to the poor and making the country slum free. “The SRA scheme in Mumbai, started by the Shiv Sena-BJP combine will be kickstarted once again, having taken a backseat during the UPA regime,” he added.

 

Source: The Indian Realty News dated May 27, 2014