Realty sector likely to be under scanner next

Realty sector likely to be under scanner next
The Hindu Business Line, March 6, 2009, Page 17

Our Bureau, Kolkata, March 5

Striking a note of caution for real estate developers, Mr D. Subrahmanyam, Executive Director of the Housing and Urban Development Corporation Ltd (HUDCO), said, after Information Technology, the real estate sector could next fall under the scanner of regulators in transparency matters.

HUDCO is a fully-owned enterprise of the Government of India engaged in financing housing projects and other urban developments. Addressing a seminar at the Realty Expo 2009, organised by the Confederation of Real Estate Developers Association of India (CREDAI), he said, “The next target of the national regulator after the Satyam scam may be the realty sector as it is known to contain elements indulging in unethical practices.” Speculation on real estate transactions by both buyers and sellers often result in pricing out of genuine buyers from the market, he observed.

The banks and financial institutions refrain from financing real estate projects as company balance sheets and other corporate papers often lack transparency, he said. “The asset agreement is considered a weak ownership document as a mortgage for financing documents,” he said, adding that some developers also deliberately avoid taking completion certificates.

Stability in future
On the strategies to be adopted in a period of slump, he said, “The developers should make a realistic study of demand and supply situation and affordability issues before investing in projects.” The sector also needed a grater degree of regulation, he pointed out.

Mr Harshvardhan Neotia, Chairman of the Ambuja Realty Group, said the current correction in real estate prices and costs is healthy for the industry as it gives leeway for the developers to become more vigilant and quality conscious. Mr Pradip Kumar Chopra, Chairman, PS group, said on the sidelines of the seminar that prices of housing units in Kolkata were down by nearly 25 per cent on an average.

Mr Jayanta Kumar Sinha, Chief General Manager of the State Bank of India, said there is good demand for houses from “genuine buyers” and that the situation would stabilise during the next financial year as cost of loans were being rationalised.

The Realty Expo 2009 is being held here at the Science City grounds from March 4-8.