by Anuj Puri, JLL
India
Current
Status..!
The GDP (Gross
Domestic Production) for the current financial year (2012-13) is not likely to
cross the 5.7 to 5.9 % mark - the predicted 8 % in GDP growth is highly
unrealistic.
JLL India expect the
budget to come up with some immediate and effective announcements to remedy the
situation.
In recent quarters,
the Central Government and the RBI (Reserve Bank of India) have been unable to
curb the inflation to a more comfortable level of between 5 to 6 %.
Considering that the
upcoming budget is expected to a populist one, given the Union election ahead
in 2014, addressing the compromised GDP and skyrocketing inflation must be
given highest priority.
The macro-economic
concerns are having a cascading effect on Indian real estate sector. Here are
the considerations that the real estate sector needs from the upcoming budget
as well as in terms of overall enablement:
* Ø
Reduce High Interest Rates.!
Now, interest rates
charged by the banks / housing finance companies to developers and house buyers
are at an all time peak and need to be brought down.
A reduction in the
base rate (rate below which no banks can lend to the corporates or industries)
is necessary to help banks lower their lending rates. The Central Government
should address these concerns in the budget, and this should be followed
through by RBI in terms of easing the repo rates and relaxing other policy
instruments such as the CRR (Cash Reserve Ratio), SLR (#), etc. to inject
liquidity into the system. This is essential if the Indian economy's key
sectors such as manufacturing and real estate are to grow.
The regulatory and
monetary authorities need to bring down the home loan rates to provide
affordable housing to more cities & towns. The scope of the interest rate
subsidy for loans towards affordable housing should be amplified and broadened
to include a wider price band of budget housing to benefit home buyers,
especially in lower income groups (LIGs).
* Ø Make Provisions For Special Residential
Zones..!
The Central
Government could seriously consider enacting provisions for Special Residential
Zones (SRZs) to incentivise the growth of housing stock at targeted locations.
* Ø Increase Infrastructure Allocations..!
The uinon budget
needs to increase infrastructure spending in urban areas with a view to
unlocking the value of neglected & hidden land assets in suburban &
peripheral districts.
This will enable more
holistic growth for the real estate markets in our over burdened metros &
allow the demand for housing to spread over a larger canvas. The increased
demand in peripheral locations in which infrastructure has made the real estate
markets there more viable will also help bring down prices in the central
areas.
* Ø Provide Real Estate Sector With Industry
Status..!
India’s real estate industry contributes about
5 % to the GDP. Moreover, the real estate sector has grown significantly over
the past decade, with tangible transformation in quality and business
standards.
However, due to lack
of regulations and effective policies, the sector is experiencing many
challenges on its growth path. The budget must consider the fact that the
Indian real estate sector generates countless jobs across its various
verticals.
By granting it
industry status, the Government would enable the sector to access debt lending
at better interest rates & reduced collateral values.
* Ø Take Steps To Provide Better Clarity In Land
Titles..!
This is another
policy hurdle which needs to be tackled by the central Government. Across the
country, land needs the benefit of legally documented ownership assigned to the
right persons or / entities.
The lack of clarity
on land titles shakes the confidence of investors, and is a serious hindrance
to overall growth. The budget should make specific allocations towards
regularizing & digitalizing land records.
* Ø Provide More Adequate Sources Of Finance..!
Since the sector is
not under the umbrella of any specific regulatory authority, financing has been
an issue over a number of years of credit slowdown. What is required at the
current time is the liberalization of finance for the real estate industry. The
budget should enable a broader scope for external commercial borrowings for
real estate and provide a general relaxation of financing norms.
*
Ø Take Steps To Moderate Rising Input
Costs..!:
The input prices for
construction have skyrocketed in recent years, rising by more than 50 % in the
past two (2) years alone.
In addition, builders
are faced with the increased costs of external & internal development
charges, licenses & charges for change of land use from various
departments.
These factors have
been directly responsible for rising real estate prices. The budget should make
provisions for subsidized construction materials for low to middle income
housing, and rationalized license fees & other government levies.
* Ø Unblock The Approvals Pipeline..!
In this budget, the Central
Government should come up with simple & effective polices that will ease
real estate development approval procedures. Obtaining the about 55 odd
permissions to begin construction of a project can take as much as two (2)
years.
During this time, the
cost of acquisition or even just holding the land for projects rises.
Single-window clearances are the need of the hour, since the absence of such
mechanisms causes project delays which prove to be expensive to both developers
& end users (Property Buyers).
* Ø Take Steps
To Improve Investor Interest..!:
REITs (#) should be
implemented so that small investors will get a chance to invest in real estate
assets. The enactment of legislation on REITs to provide exit opportunities to
real estate investors would be a real step in the right direction.
* Ø Enact the Real Estate Regulatory Bill..!
The Central
Government should once & for all finalize and implement the proposed Real
Estate Regulatory bill, which is needed to bring rationality back to the sector.
This draft bill,
which is pending since 2009, aims to create a regulatory authority for the
realty sector, ensure sale of immovable properties in an efficient and
transparent manner, and to protect consumer interest. One key proposal of this
bill is to set up a regulatory authority in each state.
The sector looks
forward to intentions in this regard finally translating into action.
* Ø
Implement GST..!:
The Central Government avowed plans to introduce
GST (Goods and Service Tax) sooner rather than later need to be implemented.
This will go a long way in streamlining the economy and providing stimulus to
GDP growth.
About the author..!
Mr. Anuj Puri is
Chairman & Country Head at Jones Lang LaSalle India
For Media Contatct
Mr. Arun Chitnis -
Assistant Vice President, Marketing
Jones Lang Lasalle
India
Level 6, Amar Avinash
Corporate Plaza, Bund Garden Road,
Pune 411001.Tel:
(020) 30930441 Fax: (020) 40196101
Mob: +91 9322738464
Website: www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
Chitnis, Arun (India)
<Arun.Chitnis@ap.jll.com>
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