HOUSING FOR AAM ADMI, A BUSINESS PROPOSITION

HOUSING FOR AAM ADMI, A BUSINESS PROPOSITION
The Economic Times, November 11, 2009, Page 8

Arindam Ghosh and Souvik Sanyal New Delhi

The global economic slowdown which shrunk availability of credit and led to meltdown in asset prices including that of real estate has had at least one positive fallout. Almost all property developers focused on bringing low cost affordable housing to attract the common man and perk up demand.

The Economic Times Realty Convention, 2009 held on 27th October in New Delhi brought together a string of stakeholders from policymakers to property developers to discuss the changing prospects of the housing sector in the country.

The focus on affordable housing over the last one year is a marked change from the past when real estate players were primarily targeting high priced premium housing schemes. "Part of the slowdown was caused by rush of real estate companies to go for top-end housing," said urban development minister Jaipal Reddy while addressing the convention.

The urban affordable housing segment forms the largest chunk of the domestic housing market. Typically, it has a steady growth in demand that does not shrink significantly with the drop in stock markets or the global economy.

To support the growth of affordable housing, the urban development ministry is in talks with the ministry of finance to make an interest subsidy and other tax incentives to borrowers on loans of Rs 20 lakh to be raised to Rs 30 lakh.

Rohtas Goel, CMD of Omaxe Ltd and president of National Real Estate Development Council (NAREDCO), said that customers currently are going in for need-based housing rather value-based housing.

He assured the government that all the real estate developers will work closely with the government in achieving the social objective. But he raised concerns over the direct tax code and asked for more relaxation that need to be given to real estate developers.

The real estate players highlighted their concerns for getting project clearances. They felt that the process to get the green signal is very cumbersome and a lot time and money gets wasted in the process. The provisions should be made more flexible and friendlier towards construction firms.

Rajeev Talwar, executive director at DLF Ltd, said, "Time taken for approvals is too long, sometimes approvals with 30 or 40 authorities itself takes about two to two and half years. No one minds paying the money for approvals, but yes the time taken for approvals has a greater cost."

Naveen Raheja, Managing Director of Raheja Developers also highlighted the concerns of the real estate firms and asked the government to fasten their process of giving approvals. He said that the people who facilitate the process of clearing projects, should be able to take decisions quickly. "There are beautiful policies and schemes which can make a revolutionary change in the country for housing, but please give us that good mindset of people who will facilitate. If they really understand us, they can sign up in five minutes instead of five months," he said.

Talking about mounting grievances of consumers of housing sector, M Ramachandran secretary in the ministry of urban development, pointed out that a real estate bill is due to be presented in the next parliamentary session, which would formulate an integrated system to address consumer grievances.

The bill would also look at the requirement of affordable housing in the coming years, to ensure optimal capacity development. Mr Ramachandran stressed on the role of basic public transport system in building a holistic housing hub in the national capital region (NCR), as the housing capacity in the capital is nearing saturation. "Improved transportation in the NCR would encourage housing opportunities in the region," he said.

Arup Roy Choudhury, chairman of National Buildings Construction Corporation (NBCC) said that the builders and developers should be mandated to adopt a transparent pricing structure, wherein consumers are informed about the construction costs, tax levies and even the profit margin enjoyed by them.

He also said that stringent penalties should be imposed on builders and developers if they fail to deliver as per committed terms, adding that a regulatory organisation should be set up to supervise the same.

Increasing the supply of low cost housing is one thing but ensuring it remains 'affordable' for the common man is also crucial. A growing number of households are paying up to half their income for a place to live and one of the primary solutions for addressing the problem of building affordable housing is lack of easy financing.

Considering the fact that affordable housing is still out of reach for a large percentage of population, R V Verma of National Housing Bank said that in order to reach out to the people in the low income segment, financing procedures of banks ought to be simplified. However, the due diligence process for giving loans should not be compromised upon to avoid the asset bubble faced by the US economy due to the sub-prime lending.