News & Resources

Full Of Promise

Saturday 01st January 2011- Times Property.

The booming realty sector can be a game changer for India in the next decade, it just needs to focus on a few crucial points like affordability and transparency, finds DEEPIKA MITAL

Affordability, regulation, transparency, adherence to green norms - all of these are crucial concerns for the future of real estate, going forward into a new decade. The view of India is rosy as it has been ranked as the most preferred real estate destination in the Asia Pacific region, according to a ULI-PwC report titled ‘Emerging trends in Real Estate in Asia Pacific 2011’. Mumbai and New Delhi have been ranked the foremost real estate market destinations, also India will continue to maintain a GDP growth momentum of 9-10% by 2015, and will witness new private equity in capital markets, which will inject capital in infrastructure projects.

Mumbai has come out two places higher than last time at third overall, as the most promising investment market and first as the most favoured development market. But even so, all is not as rosy as this suggests. Pranab Datta, VC & MD, Knight Frank India says, “Mumbai faces a set of peculiar circumstances, prime among which is an acute shortage of land, archaic tenancy laws and crumbling old buildings.” He suggests, “Draw up a plan for an ideal Mumbai and then work backward to meet the expectations of a growing city and population, as also the booming economy. It will take a mix of consistent policies, some steps to cool down pricing, addressing the inequity of the zoning system and then the constant demands of a single window clearance, industry status, a regulator and rental and transit housing for quicker slum rehabilitation.”

Datta continues, “The huge shortage of housing units is the most pressing, especially as the pace of urbanisation of an ever younger population will accentuate the huge demand for homes, where the shortfall is already to the tune of 25 million. This will need to be viewed by the government on a war footing, and steps to control spiralling prices have to be taken to ensure that further slums are not created. They will need to look at urbanisation from a different filter altogether.
A recent study states that soon 70% of our population will be in the cities creating a huge pressure on all infrastructure and housing. The different segments of this growing percentage need to be taken into account - with housing for all income groups, rather than a bias toward only the upper segment.” Giving reasons for this focus on the premium segments, Sachin Sandhir, MD & Country Head, RICS India says that since 2010 saw a tremendous turnaround with the residential sector spearheading market recovery, so developer focus has shifted to the luxury and premium housing space. He says, “Speculative demand is now as high as 50-60% compared to the generally acceptable 30% level, thereby fuelling unprecedented price hikes. This has invariably resulted in oversupply with close to 250 million sq. ft. of pan India housing inventory pileup. It is somewhat inevitable that we will see some levels of price rationalisation during the first half of 2011, though corrections may not be as sharp as in the previous downturn.”

 Brotin Banerjee, MD and CEO, Tata Housing Development Company Limited, says, "We look forward to the government taking steps in the right direction like development of physical and social infrastructure, development of more connectivity and linkages, access and ease to funding, simplification of regulations and processes, subsidies, encourage PPP models and last but not the least is to provide land at concessional rates since this is a business model that works on reducing costs to a minimum. We also believe that the Government needs to promote and support the Micro Financing sector to provide loans to the consumers belonging to the informal sector. “The real estate industry has seen a strong recovery in the past two years post the global melt down; property prices have been moving northwards due to the strong demand from consumers. With the property prices in many cities close to or even higher that the all time peak reached in early 2008, we expect the demand for premium property to decline, as the availability is much more as compared to the demand. While we expect a slight correction in the property prices in the coming months, the huge shortage of about 27 million dwellings will keep the value and affordable housing in demand among the consumers".
But affordable housing is not the only parameter - regulation and transparency too matter. Says Mr. Abhisheck Lodha, Managing Director, Lodha Developers, says, "The introduction of a real estate regulator would result in higher levels of transparency. This regulator may not necessarily decide on rates, but should put down firm principles in terms of property dealings and also quality parameters in terms of rating of constructions". "The other important steps would be to streamline approvals through a "single window clearance system" at the state level as it takes at least 18 to 20 months to receive all required government clearances. Government policies should also encourage development of townships in peripheral areas to Mumbai as well as concerted efforts to develop planned infrastructure ensuring speedy connectivity to Mumbai city, uninterrupted electricity and water supply, and also quality roads," continues Lodha.

Back to News & Resources