Real-time Stock quotes, portfolio, LIVE TV and more.
Sep 29, 2012, 04.18 PM IST
Investment in real estate properties is prudent at any point of time. It can see an appreciation of 10-15% on an average every two years in India, says T Chitty Babu, secretary – CREDAI, the national body for real estate developers in India. He underscores the need of reform measures by the govt. Such action is likely to reduce home prices.
Investment in real estate properties is prudent at any point of time. Its value can appreciate upto 10-15% on an average every two years in India, says T Chitty Babu, secretary - CREDAI, the national body for real estate developers in India. In an exclusive interaction to moneycontrol.com, he who also heads Akshaya, a Chennai based developer, underscores the need of reform measures by the government. Such action is likely to reduce home prices while easing the tedious process of project approvals.
Here is an edited excerpt of the interview:
Q. How do you explain the current state of real estate?
A. In India, we are seeing year-on-year growth in the real estate sector. The growth is not disturbed other than the slowdown in 2008. After that, there is a steady growth driven by demand.
We do not contribute the real estate growth to IT sector any more. Today the demand is coming from every sector like auto mobile, telecom, textile, leather, auto mobile ancillaries, healthcare, tourism and educational institutions. All of them are also fueling growth particularly in the residential sector. There is a shortage of about 2.7 crore homes. It has been accumulated over the last three decades. To meet this shortage, we require enormous efforts and good number of policy changes.
Q. What kind of policy changes are you looking for?
A. One important thing is the single-window clearance for approval. Today a real estate developer has to go through minimum 52 clearances and approvals before launching a large project. The final approval comes after 24-36 months. And it is costing money for the end-consumer.
When a builder invests money in the land and design and if approval takes 24-36 months, the accumulated interest of the holding cost of the land and design is 10-15% of the project cost. So, if a product is selling at Rs 4,000 per sq ft, straight away the consumer will save Rs 400-600 per sq ft under the single window system wherein approval would come within a week or month’s time. The end consumer is actually bearing the burden as of now.
Moreover, the single window clearance system will certainly help eradicate corruptions from the industry.
Q. What efforts are you driving from CREDAI for single window clearance?
A. From CREDAI, we have already given presentations to every state government on the single window issue. Now we are working with the central government. Initial feedback, we got from authorities is positive. Our consistent efforts are on for the issue.
Q. What are the bottlenecks for affordable housing schemes (below Rs 20 lakh cost)?
A. The location of affordable projects is important. It has to cater to people’s requirement. After all, the common man cannot travel 80 KM to reach his work place from home. People need to be accommodated where they will find a job opportunity. In big metros, the cost of lands is a big challenge within city limits. In that case, developers move to suburbs wherein infrastructure may be a problem.
When builders go to build projects in suburbs, they need good infrastructure facilities like road ways, electricity, sewerage and water supply. If the basic infrastructure is not available, builders will not find it convenient to go for affordable projects. It has to be supported by the government.
Q. Do you see any price correction on the anvil?
A. Prices will come down only when input costs decrease. The cost of cement, steel and all other raw material have not come down. However, the easiest way to bring down prices is the single window clearance.
Q. How prudent is the real estate investment in India?
A. Past track record shows, real estate market has been growing 10-15% every two years on an average. It is a proven track record of the real estate development in this country that investment in properties is prudent at any point of time. There is no state in India wherein prices of real estates have fallen to the level seen ten years back. Real estate is the best market to invest.
If you ask me as a developer, this is a sector where we can invest today. The future is growth supported by fast paced urbanization. Top five smaller cities for real estate investment can be Indore, Pune, Visakhapatnam, Mysore and Cochin.
Q. Banks have turned averse of lending to builders. What is the way out?
A. Banks are lending only to those real estate developers who are transparent, carry out ethical practices and delivery (possession given to customers) is happening in time. In these cases, a builder can get funds at a lower cost.
A builder with good track record will never face any problem. To raise funds, the best option is financial institutions. Bringing in more transparency in real estate business developers can access cheaper funds from lenders.
Tags: CREDAI, real estate developers , T Chitty Babu, secretary, affordable housing , price correction , investment
May 24 2013, 16:42
- in Rupee
May 23 2013, 09:33
- in Technicals