Indian Housing: The Game Changer Leading to Double-Digit Growth

The first day of the CREDAI Conclave kick-started yesterday with the first session, titled: Reebooting India Estate, where speakers such as Sushil Mantri, Managing Director of Mantri Developers; C Shekar Reddy, President of CREDAI and Managing Director of CSR Estates Ltd and Geetamber Anand, President Elect, CREDAI and CMD of ATS Infrastructure Ltd deliberated.

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Panelists at the first session of the CREDAI conclave agreed that there was not much scope for reduction of prices of homes unless the Government took steps to relax Floor Space Index norms, reduce tax burden on the real estate industry, implement single window clearance for real estate projects and reduce interest rates.
Developers opined that profit of real estate developers had gone down substantially and there was no scope for further price reduction. Mantri said: “Housing industry is in deep shortage. It is wrong to say that prices should come down. How can prices come down when there is a shortage of housing”.
Floor space index
Reddy urged the Government to do away with the Floor Space Index (FSI) concept, take the approval process online and reduce tax burden on the industry. “The real estate industry has a tax burden of 30-40 percent. This has to come down to less than 15 percent. There are multiple taxes on the industry, which eventually gets passed on to buyers,” Reddy said and added that these measures will create huge supply of homes and in a competitive market the supply will bring down home prices”.
Single window clearance
Anand hoped the Government would soon implement single window clearance system. ‘Every time we ask the Government to implement single window clearance, they say we understand but it hasn’t happened’, he said. The second session was on the topic of ‘Challenges opportunities 2014′. Speakers were RK Arora, Chairman and Managing Director, Supertech Ltd; Vijay Mirchandani, national secretary, Confederation of Real Estate Developers’ Associations of India; Jaxay Shah, MD, Savvy Infrastructure Pvt Ltd, Vice President, CREDAI; Kumar Gera, Chairman, Gera Developments Pvt Ltd
and Rajni kanth S Ajmera, Chairman, Ajmera Group. The panel discussion deliberated on ‘Will 2014 be better than 2013 was for real estate industry’.
Slowdown
The year 2013 was marked by a slowdown in the real estate industry. Will 2014 be better? Panelists at the third session of CREDAI conclave believe the industry is going through a temporary blip and will bounce back next year. RK Arora, Chairman and Managing Director, Supertech Ltd said, the slowdown in 2013 was led by sentiment and not so much by a slowdown in sales or a fall in demand for homes. Arora said since it was more of a sentiment led slowdown, home prices will not fall. ‘In fact, I think prices will go up, so it is a good time to put money in real estate,’ he said.
Arora said there was a lot of scope for growth in the affordable housing segment. “We have observed that 90 percent of the demand for housing is in the affordable housing segment. I think even in 2014, there will be good demand for this segment of housing,” he said.
Mirchandani said: “The aspiration for a home remains constant. The dream for a home will never be over. The weak sentiment towards housing is because of uncertainty in political environment. I think we will quickly recover.”  While Mirchandani agreed with Arora that the maximum demand for homes is in the affordable segment, he said the definition of affordable housing changes from city to city. “What is affordable housing in one city is luxury housing in another city but demand is always there for affordable homes,” he said. Mirchandani said with the increase in cost of land and construction material, the only way a developer can make homes affordable is by reducing the size of apartment. Shah gave a parallel to Dubai and US. ‘In Dubai and US, there were worse problems but they survived, so we are hopeful of 2014,’ he added.
Recovery
Gera said: “We expect real estate industry to recover in 2014, because of a change in Government at the centre. “In 2014 there will be change because we have Lok Sabha elections. The UPA Government is not giving priority to housing. Their focus is only on slum housing,” he lamented. Gera reiterated that 2014 will bring a positive change in every industry, which will improve the sentiments in the real estate industry. Gera also called for allowing foreign investment for individual housing. ‘A change must come. Foreigners should be allowed to invest in real estate sector like it is allowed in countries such as Spain,’ he concurred.
Ajmera, Chairman rued that the Government treated the real estate sector like an ‘untouchable’ industry. He urged the Government to give priority sector lending to the industry. “Banks finance only about 40 percent of construction financing, which constitutes roughly 70 percent of the cost of our project. Banks should finance 100 percent of the cost of construction,” Ajmera added.
The third session was on the topic: ‘Shaping the future – A Challenge’. Mohit Goel, CEO, Omaxe Ltd, and son of Rohtas Goel, Chairman and Managing Director, Omaxe Ltd; Viswajith Kumar, Director,  Navin Housing and Properties Pvt Ltd and son of Dr R Kumar, Managing Director, Navin Housing; Mohit Arora, Director, Supertech Ltd and son of RK Arora, Chairman and Managing Director of Supertech and Kruti  Kumar Jain, Director, Kumar Urban Development participated in the panel discussion.
The young turks of the real estate industry place winning customer trust and loyalty as one of their top priorities. Mohit Goel, CEO, Omaxe Ltd, and son of Rohtas Goel, Chairman and Managing Director, Omaxe Ltd, says that he has brought in aggression into the company.  “I am impatient in a good way and I believe in creating an emotional connect with our buyers. Anyone who does business with us should feel satisfied,” he said.
Kumar said one of the biggest challenge the current generation of developers faced was keeping in tune with changing customer preferences.  “Staying with the market is critical. Lifestyle changes are happening. We need to see how we can catch the pulse of young home buyer. It is part of the evolutionary process. If I don’t catch it, I won’t survive. We are trying to create a revolution in housing. Things are being done in same way. I want to change the status quo”.
Lack of transparency
Arora is worried that the real estate sector does not have enough transparency. “We need to be as responsible as a bank and we need to bring in more transparency for buyer. We need to build more trust in the industry,” he said.
Jain said: “Any city is identified with modern skyscrapers built there. Real estate is part of the identity of a nation. So I knew I had to be part of the industry”. ‘Every project has different challenges. This isn’t an opportunity any other industry will give us,’she added.
The fourth session was the keynote event. Dr Giriji Vyas, Union Minister of Housing and Urban Poverty Alleviation, C Shekhar Reddy, President, CREDAI and Managing Director, CSR Estates Ltd and Senior BJP leader, Venkaiah Naidu took part in the discussion.
Dr Vyas assured real estate developers that the real estate regulatory bill will be suitably modified if necessary. Speaking at a real estate conclave organised by CREDAI in New Delhi, Dr Vyas said the industry should not have any fears about the real estate regulatory bill. ‘There is no reason for worrying about this. We will talk to you first on the real estate regulatory bill,’ she said.
Mutual interaction
The Minister, in response to criticism from the industry said there should be more dialogue between the Ministry and the real estate industry. “Real estate has the potential to create the right economic environment. We are keen to bring in reforms for the real estate sector. The sector has to grow,” she said.
Multiple taxation
In what could be a relief for the real estate sector, Dr Vyas agreed that the Government will do a rethink on multiple taxation of the real estate sector. “We will think about relaxing Floor Space Index (FSI) norms as well and on relaxing loan facility to the sector,” she said.
Reddy raised issues related to the real estate sector such as FSI norms, multiple taxation, strict lending to the real estate sector and issues related to the Real Estate Regulatory Bill. “The Bill, if it is implemented in its current form will push up prices by 30 perfcent, instead of reducing it. We need a comprehensive regulatory authority that covers all the stakeholders of the real estate industry,” the Minister concluded her statement with the assurance that all the issues discussed at the conclave will be taken up by the Government.
Industry status
Senior BJP leader, Venkaiah Naidu asked for real estate sector to be declared as an industry. Speaking at a real estate conclave organised by CREDAI in New Delhi today, Naidu said the Government has not focused enough on creation of homes. “The NDA Government had brought in housing sector reforms but a lot more needs to be done. As a first step, the sector needs to be declared as an industry,” Naidu said.
Naidu also called for simultaneous reforms in the banking sector, land reforms and rationalization of interest rates. “Real estate developers should be given quick clearances. Also, housing sector has been removed from priority sector lending.  Back then, I had protested against it,” he said.
Naidu said during NDA rule, the then Prime Minister, Atal Bihari Vajpayee had brought down interest rate from 16 percent to seven percent for real estate industry. ‘Interest rates need to be brought down again,’ he said. Naidu also opined that the problems of the real estate sector, is a reflection of the problems that India faces. ‘There is a lack of decision making in the country. This is the reason for the present crisis,’ he asserted. Naidu said the NDA Government had taken India’s GDP growth to 8.4 percent, which has now come down to around 4.5 percent.  “There is fiscal account deficit, current account deficit and trust deficit. While people from outside are looking to come into India, businessmen from India are going outside. The Government should have clarity in mind,” he said. Naidu also said that CREDAI’s demand for abolishment of urban land ceiling, stamp duty rationalisation, priority lending to the real estate sector, should be taken up by the Government.
Fifth session was on Urbanisation – Dream of Young India, where the speakers incldued Anurag Thakur, President, Bharatiya Janata Yuva Morcha and MP and Lalit Kumar Jain, Chairman, CREDAI.
Thakur said: “It is important for the real estate sector to grow, because it will create many job opportunities. Overall growth today has come down. This needs to change. India is experiencing urbanisation at a fast pace. When people come from villages to urban centres, they want to buy homes. The question here is are there enough homes and are they affordable. When the NDA Government comes to power, it will improve GDP growth to 8.5 percent, which will in turn motivate people to buy homes. Therefore, we are pushing for more transparency in the real estate sector”. Jain said the industry was the victim of a corrupt system and not its beneficiary. ‘Real estate industry is transparent. We can debate on this’, he added.
Sixth session was on the topic of Road to recovery, where the speakers included Pankaj Bajaj, member executive committee, CREDAI, MD, Eldeco Infratsructure; Vk Sharma, MD,  LIC India; Rajiv Sabharwal, Executive Director, ICICI Bank and Vishal Kumar, MD, Xander Advisors India Ltd. Bajaj said new home absorptions were not happening because of negative sentiment in the country. “I think like every other industry, there is some deference of purchasing decision. Everyone is in wait and watch mode,” he said.
Timeline adherence
Sharma said: “There is a clear signal of a slowdown in upper and upper middle segment of housing. In the Rs 40 lakh to Rs 1 crore bracket of homes, there is a strong demand. The basic issue that home buyers have is that developers are not maintaining timeline. If you are not able to stick to project timeline, then you will be redundant,” he held.
On the issue of delays in projects, Sabharwal said that typically projects with bank funding don’t get delayed. “Projects usually get delayed because approvals don’t come on time.  The other reason for delay in projects is when a developer does not have financial closure for a project and is dependent on debt to finance the project. Bankers also suffer when delays happen,” he said.
Kumar said the mood among private equity players was very bad. “There are very few traditional players left now. A few years back, there were 132 PE players and today we might have ten players, of which only three are doing PE deals while the rest aee doing debt deals,” he said. Kumar said PE players were however making good returns on the deals they were doing. “Earlier, if one out of ten deals gave decent returns, now half of the deals give decent returns. Deals will be fewer but larger,” he concluded.

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