In this issue, NRI Achievers brings you a short outlook and analysis on the real estate sector from the country head of one of the leading multinational businesses involved in the sector, which also echoes the overall corporate thinking and expectations on the sector and it’s prospects, aft er the advent of the Modi government with an absolute majority in Parliament. Our Q&A column, whose place this analytical piece has occupied, will however return in our next issue.
What with the new government now fi rmly in charge of steering the country, the Indian economy is perched on the threshold of recovery and growth. Serious issues that have plagued the sector for so long may well be proactively addressed now. Anticipating encouraging announcements in the forthcoming budget, the Indian real estate industry hopes that the new government will be able to re-establish the country as an economic force and boost consumer and investor confi dence. We look forward to the announcement of progressive policies pertaining to FDI in real estate, since the sector is in marked need of a more liberalized funding flow. Global investors are once again enthusiastically eyeing the Indian market for the immense opportunities it off ers. There is now a very real possibility of a large increase in foreign investment infl ows, and the budget is defi nitely an ideal opportunity for taking serious steps to encourage this. Th e real estate industry once again reiterates its sincere call for preferential industry status. Despite many petitions to the government to this eff ect, real estate was not been granted this status even though its role as a signifi cant growth driver for the economy is beyond dispute. At the very least, housing must be given infrastructure status, since housing is the very basis and framework of the nation and its economy. Th e national housing defi cit can and must be reduced, especially with regards to aff ordable housing. Th e new government has announced a very clear mandate in terms of housing for all, and will therefore need to come up with a detailed aff ordable housing policy. Such a policy will need to focus on increasing the supply of genuinely aff ordable homes in the budget bracket of Rs.20-25 lakh. Th e success of such a policy will depend on respective state governments playing a proactive role as well. Ideally, aff ordable housing projects should be allowed on smaller land parcels so that such land under private holding can be monetised eff ectively. Alternately, the government can release land currently being held by it to developers for aff ordable housing projects, at nominal rates. Also required is a single-window clearance for such aff ordable housing projects, as well as additional incentives in the form of waiver of registration costs, stamp duties, etc., on land purchase for developers undertaking such projects. Other additional pay-outs for residential projects to the government, such as conversion and internal development charges, could also be waived. Th e policy could fi x the maximum price for such projects, thus enabling them to remain truly aff ordable. Also, for such aff ordable housing projects, density and FAR norms can be increased to enable mass housing at lower costs. Developers of aff ordable housing may also be incentivised in various ways, such as:
- Allowing them a certain commercial component within these projects which they can sell at market rates
- Reducing duties and excise on prefabricated materials for use in aff ordable housing projects
- Providing additional FAR to projects that also comply with environmental sustainability guidelines
All such benefi ts to developers will ensure a pass-through to the buyers, for whom the prices will become aff ordable. A clearly- defi ned policy by the governments along such lines would enable long-term investments into this sector. Th e Indian real estate sector also looks forward to a budget that outlines measures to tackle infl ation without stifl ing overall growth. Interest rates must rationalize and home sales pick up once more. Th e stock markets have already perked up visibly up and the Indian rupee is regaining strength. We certainly expect that the new government will take measures to reduce infl ation, but also ensure that this is not done at the cost of the green shoots of market positivity we are now seeing.