(1) How has the real estate industry in India evolved in terms of structure and scope since the nineties?
Ans: Real Estate has established itself as a separate and distinct economic activity from and within the traditional Construction and Housing industry in India, which was traditionally a stronghold of the public sector. As a result, private investments into this sector have multiplied over the last decade and a half. Developers increasingly corporatised their businesses to leverage the ‘free markets’ guided economic policy of the country. So this sector has definitely evolved to a large extent over the past 15/16 years, though ‘the road ahead’ is long and not easy. Complex legislations, a plethora of state-level laws have translated into impediments to growth of this sector owing to lengthy judicial procedures and transaction delays. Corruption has been an issue for the country as a whole, and real estate sector is a part of it, by default. However, we feel that now with organized and listed companies the corruption will start disappearing.
(2) What are the major infrastructure bottlenecks in the real estate sector and what has been CREDAI NCR’s approach in this respect? Is the government doing enough now? How can the gaps be fixed?
Ans: High transaction costs, complex legislations and myriad laws related to this sector are some of the soft infrastructure issues faced by the developers. Incentives like tax breaks/holidays might act as a great booster for this sector. Frequent fluctuation of major input prices for these industries like cement, steel etc. have also contributed to hitches in the growth momentum of this sector. It has been estimated that for the last few years this industry is growing at more than 30 per cent per annum. Yet, it is surprising that this sector has not been accorded industry status. FDI norms are still very restrictive, and it is somewhat ironic that this is happening at a time when the entire world economy is reeling under ‘credit crunch’. CREDAI NCR through its various forums, meetings and consultations has raised concerns about infrastructure with the government in the past. We will continue to do that in future and actively participate in the process of physical infrastructure development. Government has definitely put infrastructure development in the priority list. The Twelfth Five Year Plan is committed to address this issue and an investment to the tune of US$ 500 billion is going to be undertaken for the infrastructure development alone during the plan period.
(3) What about the low cost housing to not so rich and the poor people? How has Public Private Partnership (PPP) in this area performed?
Ans: A lot remains to be done on this front. An Asian Development Bank (ADB) estimate show that some 10 million housing units will be required by 2030 in India. Where are the investments going to come from? We need liberal foreign investment rules and a stronger financial system to ensure liquidity in the economy. Real Estate Mutual Funds (REMF) and Real Estate Investment Trusts (REIT) are just at a very nascent stage in India. We have still not adopted these financial practices in our country. PPP approach might have worked in the construction sector, but doubts exist about their viability in the real estate sector in India given the shape of the things at present.
(4) About the core businesses of the CREDAI NCR Membership - Homes, Office and Retail space development, has India (and NCR in particular) been able to keep pace with the demand for space?
Ans: This seems to be a very touchy issue, once this matter is linked to urban renewal and slum relocation angle. We have seen honest efforts from the government like in the NCR itself where illegal occupation of lands and house owners flouting municipality norms by erecting illegal constructions have been dealt with sternly. Be that as it may, rate of influx of migrants into the capital city has been increasing at enormous pace is also a fact. Demand for space is soon going to outstrip supply. We need to look at newer technologies for maximum utilization of space within the city and may expand our construction in a planned manner taking into consideration environmental concerns. It is not only space that is at premium, but we should keep a close watch on environmental impacts of construction of buildings.
(5) Have the land policies affected real estate business in the NCR? And what are the tax policy implications for the real estate sector in India?
Ans: The state and central government always have different policies, its important to look for harmonisation of rules and procedures of transactions related to land across the country. Transparency and accountability coupled with a win-win attitude among the stakeholders is positively going to take things in the right direction.
(6) Special Economic Zones (SEZs) have been successful in China. In India, since its inception it has been mired with controversy and political tussle. Your comments on this?
Ans: SEZ Policy aimed to kick-start the manufacturing revolution in India after the impressive performance of the service sector in India led by IT and the New Economy. Naturally, stakes are high for developers in SEZs. It holds out immense opportunities for real estate and the construction industry on the development of SEZ front. There are enough reasons to be optimistic about the future of SEZs as this is considered as the engine for growth in India as gradually the required areas are being looked into by the government. Indian industry through its increasing export orientation has been serious in taking up this issue with the government time and again in the recent past.
(7) What can the government do about the rural economy? Are labour laws seriously hampering the growth of the real estate sector?
Ans: About 70 per cent of the Indian population lives in the country side in India. Naturally, India is predominantly rural that way. Much of the growth has taken place in the urban areas, especially the metro cities. Rural labour provides a bulk of the workforce for the construction sector. Once this sector is accorded industry status, things will get more organised and this sector can provide jobs to millions of poor people from the under developed areas of the country. This sector has the potential to create employment for the masses.
Labour laws have remained contentious issue in India for being far too flexible. It is often pointed out that China our neighbouring country score much better in this respect. But then ours is a democratic country and things do not move until consensus is reached among various stakeholders. Progress will happen in this area at slower pace, but nevertheless it will happen.
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