With the Budget
2015 around the corner now, real estate developers are keeping their
fingers crossed for Modi's government to announce policy reforms that
will change the dynamics of the industry.
Industry players have commonly voiced that the government must announced reforms to cut down on the bureaucratic red tape involved in project development. "Expedited clearances for a larger segment of residential projects will be a key for reducing project delays. An announcement that streamlines the process of obtaining clearances will go a very long way in boosting the real estate industry," said Anil Pharande, chairman and managing director of Pharande Spaces.
The current scenario
According to Rohit Gera, managing director of Gera Developments, the realty sector has been under stress as the sector is a highly capital intensive business, with a major portion of the residential segment being financed through customer sales proceeds. "Developers therefore do their budgeting with this assumption and therefore, for the most part, finance costs on construction of the project are not factored in the proforma profit calculations. As a result, when sales are slow as they have been, developers (who have access to construction finance) are forced to borrow and the interest costs eat into profitability," said Gera.
He further added that in the past few years, the construction costs have surged "This gets further compounded when construction costs rise more than the increases in the sale prices of the apartments. In 2009, in spite of the continuing negative sentiment based on the global meltdown, the UPA re-election led to an instant impact to the stock and real estate markets. This time however, even though the mandate has been far more decisive, the real estate segment has not seen the turn in customer sentiment and purchase. I believe this is because people are waiting to actually see the benefits to their pockets of the ache din promise by the government," noted Gera.
Industry experts have suggested that the government will have to take several measures to improve the sentiment in the real estate sector. Apart from reducing the red tapism that mars the industry, realty developers expect the government to take steps to regulate the construction material costs.
Reiterating Gera's concerns, industry players have emphasized that the government has to regulate the rising prices of raw materials such as cement and steel as they have adversely impacted the input cost of a project. "The costs of raw materials such as cement and steel need to be brought down or an upper ceiling imposed on their prices," stated Pharande.
Apart from regulating the input cost of a project, industry players have also suggested that Union Budget 2015-16 should address the tax issues in the sector. In what could be a relief for the home buyers, the developers have recommended the government to remove multiple taxes such as VAT and service tax along with stamp duty and registration charges while purchasing a house. "Stamp duty and registration costs are as high as 6% in most cases, and this needs to be reduced by a few base points to aid consumers. Alternatively, a slab-based approach should be introduced. Stamp duty falls under state government purview, but the Center can nevertheless issue a directive to reduce stamp duty costs. Also, Goods and Service Tax (GST) should be introduced in the place of these taxes," said Kishore Pate, chairman and managing director of Amit Enterprises Housing Ltd.
Raising the issue of ambiguity in the functioning of the real estate sector, builders have recommended the government should implement the Real Estate Regulatory bill, which will bring in an apex body in the sector, which is expected to address concerns with transparency.
The credit challenge
Real estate players have time and again asserted that realty sector is a capital intensive sector and raising finance for newer projects has been a challenge. With the budget 2015 soon to be announced, industry players are hoping that the government will be more pro-active in facilitating credit availability for the industry.
"The budget needs to do something to bring down the cost of borrowing for developers, because raising capital for development of new projects remains a huge challenge. Lending rates for real estate development currently range between 12% to 14%, and raising funds through other sources is even more expensive. The interest rates on lending to real estate developers should be brought down so as to help rationalize the cost of construction. This would also help in bringing down property prices," said Arvind Jain, managing director of Pride Group.
Talking about higher interest rates that have dampened the consumer sentiment in the past few years, Jain noted, "We real estate sector was cheered by the recent cut in interest rates, but it was by itself not sufficient to amount to any real advantage to home buyers. The Union budget should bring a significant decrease in interest rates on home loans. The Ministry for Urban Development and Housing had made it clear that it would maintain a sharp focus on reducing home loan interest rates, and the budget will hopefully bring firm evidence of this focus. Developers, home buyers and banks are all keenly awaiting such an announcement, which would bring with it a significant revival in sentiment".
I’ve been a sports person, and also captained my throwball and volleyball teams. I understand the importance of extracurricular activities in our growing up years.
Trainings provide a child with the required discipline when working within teams as well as gives one the chance to follow what makes you happy. It also enables an overall development!
Dance has been my passion since I was a child and I have been thrilled to see both my little ones have this in their genes too.
This opportunity really came to my doorstep through Gera. My daughters Lavanya and Diya have had an enthralling experience being a part of not just one but three Academies (The Shiamak Davar Dan..
I cannot thank you enough for making our journey with Gera so so interesting and mind-blowing. I had never ever imagined my life taking a beautiful turn with me beginning to start my career as a music teacher that too with SMA (Shankar Mahadevan Academy) and all this has been possible only because of GERA and YOU my dear.
It is only because of your efforts and kind gesture that I could meet the man himself (Shankar Ji) and have a small recording session with him. That was like a dream come true.
I am super excited to start my journey with SMA and Gera as a teacher now.
Apart from that, Me and Prateek have always been grateful to you for making Shiamak happen for us and I ..
It was indeed a pleasure being a part of the Christmas celebrations at Astoria. Kudos to the Gera team for bringing in such a wonderful event with great carol singing participation from our own kids. It brought in the spirit of Christmas and the games, Santa, the gifts only added to it. Thanks for organising such a wonderful event which helped in community building...looking forward to many more such celebrations!..
The Christmas event organised at Astoria was a big success and a big step in bridging the gap between us and Gera. It was a memorable event as we are still in the beginning of our journey of life in our little home at Astoria. The kids have been the happiest of all and what more can we ask for when we see smiles on the faces of our little ones. Kudos to you and your team for making this event a huge success! Looking forward to many more in the years to come...
The Christmas party organised by Gera at Astoria this year was a great success with good participation from kids and parents. Our children Sia and Saish enjoyed the party to the fullest. Sia, in particular, had a gala time and reiterated her stand that Anita aunty's parties are THE BEST.... We as your customers take much pride in informing our friends that such goodwill gestures are one of the many differentiators Gera brings to us, which no other builder in Goa can boast of. Many thanks to you and your team for doing an excellent job in putting up this event. We look forward to the next one! A big thanks to the Gera Management for its efforts in community building...