Upbeat realty sector seeks to tame job cuts

Upbeat realty sector seeks to tame job cuts
The Financial Express, February 25, 2009, Page 5

fe Bureau

With the third stimulus package announced, real estate developers and market analysts anticipate an improvement in the margins of the real estate sector and no further job cuts. The booster package includes reduction in service tax and an excise cut of 2%.

Hiranandani Constructions managing director Niranjan Hiranandani told FE, “The third stimulus package is very good. As an impact, there would be no job cuts further in the construction sector that has witnessed 1.5 million job cuts in the past 12 months. Besides, the 2% excise cut on cement is another positive news for the construction sector. In the near future, the real action in the real estate sector could be seen in terms of developers re-starting constructions within their existing projects. Also, SBI’s new home loan scheme whereby a customer pays 8.5% for loans upto Rs 5 lakh and 9.25% for loans between Rs 5 lakh and Rs 20 lakh is encouraging for end-buyers. Hence, even we feel that we should start planning to restart construction of new buildings within the existing projects.”

Similarly, chairman Akruti City Hemant Shah, said, “The third stimulus package in the right direction as it will surely help corporates across the board, and even real estate players to some extent, in improving the margins and recovering costs. It seems now that the economy is all set to improve”.

Even the market is upbeat with positivity for the sector. Says Hitesh Agrawal, Angel Broking research head, “In continuation of the stimulus measures announced over the past three-four months, the government has announced some more relief to the Indian economy. The cut in excise duty and reduction in the service tax rates is a welcome relief for the manufacturing and the services sector of the economy, which combined contributes to almost 80% of the country’s GDP. Notably, while the government has refrained from making any announcements in the interim Budget and had also indicated earlier of no further measures on the stimulus front, the current move is more or less in the form of a third stimulus package, this time benefiting a wide range of sectors. However, the impact of these either to prop up consumer demand or to the economy at large would not be significant.”

Nayan Shah, CEO Mayfair Housing has also welcomed the government’s move. He opined, “We welcome the announcement by the central government to reduce excise and service tax rate. In fact, in the last 60 days the central government has announced three stimulus packages. However, announcement by the state government to impose 1% registration fee on February 17 on transaction is a negative move as compared to earlier 1% or Rs 30,000, whichever is lower. This will have a negative effect on the real estate sector and end-buyers as demand for properties will drop further now.”