by Mr. Anuj
Puri, JLL India
Indian Real Estate
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 per cent mark –
the predicted 8 % in GDP growth is highly unrealistic.
We expect the budget
to come up with some immediate and effective announcements to remedy the
situation.
In recent quarters,
the Union 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.
 |
| Anuj Puri, Chairman, JLL India |
Here are the
considerations that the sector needs from the upcoming budget as well as in
terms of overall enablement..!
Reduce High Cost Of
Borrowing..!
Now, interest rates
charged by the banks 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 housing 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.
Grant Real Estate Infrastructure Status..!
To date, the only
industries that have enjoyed infrastructure status were road & highway
construction, ports, airports, rapid public transport systems, and so on. Real
estate was not granted infrastructure status, despite the fact that it is a
significant growth driver for the economy, generating countless jobs and
directly catering to the needs of individuals & the businesses in which
they work and which they patronize.
Real estate is
infrastructure in the truest sense, as it deals with building the very
framework of the nation and its economy. This is why it should be granted
infrastructure status and be given the benefits of this status.
As an alternative,
the government should consider enacting provisions for Special Residential
Zones (SRZs) to incentivise the growth of housing stock at targeted locations.
Increase
Infrastructure Allocations...!
The budget needs to
increase infrastructure spending in urban areas with a view to unlocking the
value of neglected and hidden land assets in suburban and peripheral districts.
This will enable more holistic growth for the real estate markets in our
over-burdened metros and 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.
Take Steps To Provide
Better Clarity In Land Titles..!
This is another
policy hurdle which needs to be tackled by the 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 and digitalizing land records.
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 sector.
The budget should enable a broader scope for external commercial borrowings for
real estate and provide a general relaxation of financing norms.
Take Steps To Moderate Rising Input Costs..!
The input prices for
construction have skyrocketed in recent years, rising by more than 50 % in the
last 2 years alone.
In addition, builders
are faced with the increased costs of external and internal development
charges, licenses and 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-mid-income housing, and rationalized license fees and other government
levies.
Unblock The Approvals Pipeline..!
In this budget, the
Government should come up with simple and effective polices that will ease real
estate development approval procedures.
Obtaining the 57-odd
permissions to begin construction of a project can take as much as two 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 and end users.
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.
Enact the Real Estate
Regulatory Bill..!
The central
Government should once and 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.
Implement GST..!:
The Union 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
Src: Jones Lang
LaSalle India Real Estate Compass
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