by A.Sankara Srinivasan, Founder, Realtycompass.com
House buyers in the last few years are reeling under
pressure with increase in land prices, construction cost, interest, and time to
get approvals etc.
Home buyers have a long wish list to reduce home costs
by way of policy changes from state and central government. Let us look at
those below;
Provisions in
proposed regulator for the industry..
Real estate is
the second largest industry which gives employment to unskilled people next
only to agriculture. It is one of the industries which touches and every
citizen in India.
However unlike
similar industries which have wide reach to people, real estate is the least
regulated industry. In the proposed Real Estate (Regulation and Development)
Bill, 2013 provision should be there to standardize quality of construction,
sales terms (super built up area, built up area, carpet area etc), pricing etc.
There should be
provision to punish erroneous builders who fail to deliver on time, increase
rates without notice, constructing buildings without approvals etc. Since real
estate approvals are within state government jurisdiction, a central regulator
with decentralized supervision from state bodies will ensure implementation of
policies.
Rationalization
of guideline value for land..
Tamilnadu
government has revised guideline value for lands in 2012 to market value in
various places which reduced lesser black money in land transactions, as buyer
has to pay by Cheque to the seller of the consideration amount.
Under-valuation
of land means lesser stamp duty to be paid to government and increase in cost
of home, as builder charges money lost on income tax benefit which paid in cash
to land owner, to the home buyer.
At the same time
there are certain pockets of Chennai where guideline value is higher than
market price and hence builders don’t develop projects in those locations.
Higher guideline value increases projects cost as more stamp duty and more
capital gain liability for land owner (IT department may to ask to pay capital
gains on GV).
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| A.Sankara Srinivasan, Founder and COO, Realtycompass.com |
Tax on
non-utilisation of land, house properties..
There are huge
land parcels (thousands of acres) in Chennai with individuals, private
organizations, and with public sector enterprises which is unutilized for a
prolong period of time. Government may levy tax on any land parcel, which is
not being used for any commercial activities. Unlocked land parcels will reduce
land prices and will result in reduction of home prices. Any tax collected can
be utilized to develop infrastructure in the city.
In similar
manner tax to be levied on prolonged unoccupied homes to curb increase in
prices. Close to 15% of homes in major cities in India are unoccupied. Goa which
had 25 % unoccupancy rate in 2012, planned to impose tax on these homes. S T
Puttaraju - chief town planner, town and country planning department Goa who
was earlier proposing to tax unoccupied homes to curb increase in second home
prices, however dropped it for various reasons.
Enhance FSI..
With many states
giving higher FSI (Floor Space Index) which allows to construct more built-up
area for given land area, TamilNadu has one of the least FSI in neighborhood
states.
Higher FSI will
reduce cost of homes to the extent of 20 %.
Development of
land by government..
Even in major
residential areas in Chennai, do not have proper potable water facilities.
People purchase water in tanker to use for day to day life. Despite of paying
corporation tax majority of the citizen do not have access to basic amenities.
In cities such
as Noida, the state government acquires land, provide basic amenities like
power, road, water connection, telecommunication etc before handing over to
private builders to construct homes. This will ensure people have access to
basic amenities.
Single window
for all approvals, license..
One of the major
costs in constructing home is cost to obtain approvals. There are over 200
approvals from 10 different departments are to be obtained. Delays in getting
approvals, bribery are increasing project cost significantly.
Government
should create single window of approvals for projects which complies with
standard building plan, construction plan and for the qualified builder. Single
window approval will not only reduce in construction cost but also reduce in
project completion where home buyer pays money and wait for project to be
completed.
Reduction in
Home Loan Interest rate..
Housing loan
interest rate of 10.25 % is at peak in recent times.
Reduction in
interest rate will make buying home affordable for many.
Allow ECB in
real estate..
Indian real
estate sector is deprived of cash infusion by way of FDI (except under Note 2)
or / ECB. If loans are available at
cheap rates, cost of funding will reduce as well as will construction will not
be stopped due to funding shortage.
About the author
Mr. A.Sankara
Srinivasan is Founder,
Chief operating Officer
at Realtycompass.com
Email:
sankara@realtycompass.com
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