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LOOK BEYOND FISCAL SOPS TO MAKE HOMES AFFORDABLE

The Times of India - 28 September, 2012

Union finance minister P Chidambaram may soon announce a set of measures to give a boost to the country's real estate sector which is hit by the high cost of finance and low availability of housing stock. Real estate players, however, feel the thinking underlying any such move by the government should go beyond offering fiscal concessions and address the other issues that have a role in jacking up the costs of homes. The government is in the process of formulating a reforms package for the real estate sector which may consist mainly of financial sops such as reduction of lending rates by banks or relaxation of norms for classification of their real estate exposure. Observers say these fiscal efforts may be inadequate to solve the entire gamut of problems confronting the realty sector. Sanjay Dutt, executive managing director, South Asia, at the real estate research firm Cushman & Wakefield told TOI that though the government is propagating active participation from the private sector in tiding over housing shortage, it is reluctant to provide suitable conditions for such development. "The recent policy allowing external commercial borrowing for mass housing projects is a positive sign, but more would have to be done such as greater availability of land, tax incentives for the economically weaker sections (EWS) and the low-income groups (LIG), low land cost through higher floor space index and short approval process can go a long way in easing pressure on prices," he said. Also important would be measures such as removal of customs duty pre-fab manufacturing plants and such technologies, Dutt added. The current estimated shortage of 18.78 million urban houses as reported by the ministry of housing and urban poverty alleviation shows that nearly 25% of urban Indian households are without proper homes, he said. "That almost all these households belong to people in the EWS and LIG is hardly surprising. This is an indication of the times to come, when unauthorised housing and poor living conditions in the urban areas will only grow, unless some drastic measures are taken to address the issue. The government efforts have not been enough to curtail the housing problem, while the private sector does not have the bandwidth to provide housing for EWS or LIG section within the city limits owing to high input costs," Dutt said. Rohit Gera, director, Gera Developments, said, "A reduction in the high interest rates for home owners will come as a boost for the citizen who is reeling under high inflation - many home buyers have as much as 50% of their income going towards EMIs for home loans. The relaxation in the provisioning norms for real estate loans will also lead to a marginal reduction in the cost of borrowing for developers." Gera said the other area that adds tremendously to the overall cost is the inordinate time it takes to obtain sanctions for commencement of any construction project. This can range from six months for a small project to over two years for a project requiring environmental impact assessment approvals, he said, adding that during this time the project continues to incur costs that get loaded onto the final home buyer. The two foremost things, therefore, that can be done to reduce the costs for future home buyers will be to address these two issues squarely, he added.

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