Delhi, India (PressExposure) December 04, 2009 -- With the real estate sector gradually emerging from the pangs of recession, there is need to create a mechanism to put the sector back on the growth track and avoid pitfalls Sandeep Rai
The recent global financial meltdown has completely shocked the world even though the Indian economy as a whole has largely been insulated against global economy slowdown. Despite that, the Indian real estate sector had been severely hit in the mayhem. Nevertheless, there have been some improvements in the market sentiments now and lot needs to be done to ensure the growth reaches its original momentum. Now we expect that normal buying cycle is back. But there are certain concerns. This is the time when the real estate market will witness fundamental change for now buyer will look for need based accommodation. He will be highly cautious and choose on the basis of performance rather than euphoria. With the focus shifted to affordable housing, the real estate sector will now speak more about volumes.
As per Dr. M. Ramachandran, secretary, ministry of urban development, "There is a dearth of more than 24 million low cost households in the country", which is actually a whopping figure. The major question that arises in this context is of availability of land which according to the sector pundits is a scarce commodity by all means. Nevertheless, there are a few who do not agree that land is not available for development. According to Anshuman Magazine, CMD, CBRE India, "There is a general perception that there is shortage of land for urban or low cost housing development but the fact is that still we are using only a very small percentage of land. And I am of the opinion that there is enough land available. All we have to do is to create good infrastructure.
The more the infrastructure is developed, the more the land can be brought in to use for development. And infrastructure here does not only mean roads and bridges but includes schools, hospitals, social infrastructure, etc., and that's where the government can play a major role. Second thing is the availability of low interest capital both for buyer and developer which will obviously allow more people in the range who can afford to borrow money to buy and this consumption will bring in more supply."
The second major concern has been the pricing. According to Jaipal Reddy, "We had real estate boom with mind boggling prices and we had a slowdown, but, part of this slowdown was caused by the rush of real estate companies for top end apartments and buildings." With complete focus on niche segment, the household prices hit the roof, a mistake the sector cannot afford to repeat. According to Rohtas Goel, president, NAREDCO, "To overcome the challenges, the real estate developers have already bottomed out the prices and have not only launched affordable housing but have also revisited their ongoing projects and redesigned them into affordable models. Now developers have started working on water thin margins and are also ready to work hand in hand with the government to achieve its social objective of providing housing for all through public-private partnership as a mission."
However, to fulfill this task what is needed is a consensus model which will be ideal, transparent, workable and implementable and that will be of interest to all the stakeholders. Well there has been some focus of the government in introducing reforms, yet, to revive the real estate sector much is left to be done to increase the pace of growth and to fulfill the dreams of millions of houseless in India and the motto of government for housing for all there is need for government to provide some more relaxations at this point of time.
Sums up Goel, "Given the demand and emphasis of the government on affordable housing, there is a need to re-introduce section 80IB10. Under the section a developer gets tax benefits if he constructs the property in four years time. It is requested to increase the time frame since these are the times of recession and developers find it increasingly difficult to complete construct within the allowed time frame. Government needs to take a re-look into the direct tax code which is likely to be introduced in 2011.
And since it has certain negative points for individual buyers such as abolition of benefits under 80C for the return of housing loan, discontinuance of benefits under IT act for self occupied property, etc., encourage states to reduce stamp duty to 5% and provide a system of credit for each stage of sale. At this point of time every transaction has a stamp duty. If some property is sold at Rs. 10 lakhs and in the next stage it is sold at 15 lakh rupees so the levy should be on Rs. 5 lakhs and not on Rs. 15 lakh, since tax on Rs. 10 lakhs has already been levied. Similarly the custom duty on capital equipment used in construction should be reduced from 8% to 4%."
Courtesy:- TOI dt:- 20/11/2009