Inefficient governance led to gloomy housing scene: CREDAI

The Indian real estate sector has been the most important component adding to the country's GDP. Today, the sector contributes 6.3% to GDP, but yet the sectors potential is not utilised to its fullest. "Inefficiency on the part of the government is hurting consumers. There is lack of conviction at the helm. If industry suggestions are incorporated and government becomes more efficient we can increase real estate contribution to GDP to 12%," says Lalit Kumar Jain, Chairman, CREDAI.

A white report by CREDAI will be unveiled at the National Conclave 2013 on December 13-14, 2013, which will emphasise on how the potential of the housing sector can be maximised to ensure its contribution to its best capabilities towards the country’s economic growth. The conclave will bring together the stalwarts of the industry to ideate on the pressing issue – that is project clearances in India.

"In Maharashtra, about Rs 1,25,000 crore of investments are stuck due to delay in environmental clearances in the past two years. There are about 48 NOC’s and 150 approvals to be acquired to kick start a project and there is a cost involved which eventually is borne by the customer. If one window clearance comes into force, there will be a 40% of reduction in cost." adds Jain.

He adds that in Mumbai alone, there was a 40 percent drop in projects that applied for approvals during the first nine months of 2013.

On asking, if just delayed approvals were adding to the sky high prices in the country, Jain draws a list of taxes that are a part of the cost structure. “Of the value, 30 percent to 37 percent across the country and more than 45 percent in Mumbai is the tax component which includes, direct and indirect tax, development charges, stamp duty etc. Local urban body in Mumbai charges premiums, charges for the fungible FSI, making housing even more expensive.”

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The list of concerns do not end with just projects approvals or delays. The ripple effects can be seen even in the employment opportunities the sector provides. About 7 crore people depend on the real estate for their livelihood. The sector saw 18-20% job losses over the last one year because of weakening sales and tight liquidity and this number could rise to 30% if the current situation continues.

(Posted by Manasvi Ghelani, CNBC-TV18)