Demand for property to remain sluggish, says Adi Godrej

Indian real estate sector has witnessed tremendous volatility since a long period of time as a result of debt crisis in the US and European, which has affected sentiments across the world. Experts feel that the realty segment is likely to see a gloomy phase in the next 12 months as developers are likely to face issues like liquidity shortage, weaker-than-expected sales and margin pressures.

Adi Godrej, chairman of Godrej Industries tells CNBC-TV18 that demand for property is going to remain sluggish in India. Speaking on the new land acquisition bill, Godrej said that it is unlikely to affect industrial development; however, he feels that the bill will be highly inflationary for affordable housing projects in urban areas.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: How difficult is the situation for the industry right now since the IIP numbers were dissapointing and we cannot go by the IIP numbers?

A: The IIP numbers were partly sluggish as the confidence factor got affected by the global economic situation. They were also affected by the fact that we have had a slow period in policy decisions. However, I see very strong growth ahead for India, no matter what happens in the global economic sphere.

There are four important macro trends, which can drive Indian growth very strongly in FY12-13. The Goods and Service Tax (GST) is one trend and now with Sushil Kumar Modi being made the chairman of the committee, the possibility of GST being introduced in the early part of FY12-13 is strong. The new manufacturing policy is very well drafted; it can create great impetus to manufacturing and industrial growth, which will help GDP growth.

The new competition policy, which the government wishes to bring in within a month or two, will regulate government departments, ensuring that competition is promoted. It will certainly add value and bring down corruption to a considerable extent, increasing transparency in the system. So, there are very many factors that will help India to stand in good state.

Q: What did you make of the land acquisition bill, which has been proposed? You have got interest in real estate as a group, how do you think that will move now?

A: The land acquisition bill is a development, which was inevitable because there were too many protests on land acquisitions, too much resistance from farmers and land owners. So, we had to bring in legislation to address those issues.

However, it will be inflationary as far as land is concerned. For industrial projects, the inflationary factor would be tolerable because in a large industrial project, government acquires land for around 5%, which may increase the salience of the land cost to more than 10%. I don