Enlightening Festive Season
Confederation of Real Estate Developers Association of India – CREDAI expressed their hope of 20 percent improvement in the housing sales. This improvement will be mainly in the major cities of India. Smaller cities always remained unaffected by the interest rates. Continue reading
Announcement of a memorandum of understanding (MoU) between the Confederation of Real Estate Developers Association of India (CREDAI) and the Karnataka State Fire and Emergency Services (KSFES) Department on fire safety certification has raised quite a few eyebrows in the real estate industry.
While an industry expert questioned how “credible” would the entire process be, if the issuance of a no-objection certificate (NOC) and a clearance certificate (CC), which earlier took months or even years, would now have to be completed within 30 days. “Currently, the KSFES has been manually going through each drawing and then mulling over all the errors and suggestions. This consumes a lot of time. According to our MoU, we will be providing software prepared by a company which would identify the errors in the drawing. It would indicate whether a particular project proposal is in acceptance of the norms by highlighting the faults in red colour. Then at the click of a button, the department can either condone or reject the proposal. The company has provided similar software to civic bodies of other places like Mumbai, Pune, Ahmedabad, Nagpur and other places. Hence, their credibility is established,” asserted Sushil Mantri, under whose President ship CREDAI signed the MoU. He argued that it is important to make this move as almost 90 percent developers are suffering because a handful of builders did not follow norms.
“CREDAI members are responsible for almost 60-70 percent output of the city. Further, to become a member of the confederation, they have to sign a code of conduct which covers all the approvals and rules. By delaying progress of approvals, not only do builders incur losses as production suffers, but also the revenue to the city and BBMP is further delayed,” he said.
Mumbai builders have called off their strike scheduled for May 3.
The Maharashtra Chamber of Housing Industry and the Confederation of Real Estate Developers Association of India had called for a one-day token strike protesting the delay in project approvals and against the State Government’s move to establish a housing regulator.
The Builders Association of India too decided to participate in the strike. Addressing media persons here on Wednesday, Mr Paras Gundecha, President, said the Chief Minister, Mr Prithviraj Chavan, met the association on Tuesday and assured the members that all issues concerning builders would be addressed.
Mr Gundecha said MCHI also made a presentation to Mr Chavan on the issue faced by developers and sought a single window clearance for housing projects. The Chief Minister had also made it clear that the government’s priority was to build affordable housing stock, he said.
The jump in land, materials and labour costs has pushed property prices up by 25%-30% per cent and slowed the growth of the real estate sector in Coimbatore in the last two years. Property developers in the city believe that if the real estate sector has to grow at pace similar to that of Chennai, which despite the global economic slowdown, registered a steady growth quarter after quarter, as per the residential price index brought out by the National Housing Bank, the government has to develop infrastructure facilities, promote industries and improve water bodies.
“There is not much space left for property developers inside the city. All construction activities are moving towards the suburbs,” said V Subramanian, president, Confederation of Real Estate Developers Association of India (CREDAI), Coimbatore. However, land prices have increased in the outskirts in the past two years. The cost of material and labour is also on the rise. This has seriously affected the middle income group, which is the major segment that invests money to buy property. Property developers have been forced to pass the cost increase burden on the people, which have slowed down the market.
“Land costs have increased four-fold in Coimbatore, which is causing major problems for developers,” Subramanian said. Cement, which was costing Rs 190 a bag a year ago, is now available for Rs 300. Steel prices have increased from Rs 38000 per tonne to Rs 60000 per tonne now. Developers are struggling to control their costs and boost sales. Omkar Sankar, director, Sankar Foundation, said there is huge demand for affordable and low-budget houses in Coimbatore. But the jump in prices of affordable houses is now becoming a cause for concern, he noted.
Flats that were sold for Rs 4500 per sq. ft. in Ramnagar area are now being sold for Rs 6500 per sq. ft. Similarly, in areas like Vilankurichi, Thondamuthur, Vadavalli, which are outside the city, costs have moved from Rs 2300 per sq. ft. to Rs 3500 and more. Though the recent lowering of interest rate by banks may bring some respite, developers are still in a wait and watch mode. The situation in Coimbatore is different from Chennai, which is well connected with infrastructure facilities even in far-off areas.
There is a huge demand for housing in Coimbatore and in the next few years there would be at least a demand for 1 lakh housing units, said P Karthikeyan, Chief Executive Officer, Trishul Shelters Private Limited. However this would require good connectivity and infrastructure development in the suburban areas, which is lacking now, he said. Besides the developers have to look at ways to keep costs down by adopting innovative methods and different technologies, he noted.
The interest rate sensitive realty industry Tuesday welcomed the Reserve Bank of India’s (RBI) decision to cut key lending rates by 50 basis points, and felt the move will boost builders’ and home loan customers’ sentiments alike.
“For the real estate in particular, this is indeed a welcome step by RBI. While the sector was already reeling under the pressures of high interest rates, this will allow banks to lower down the interest rates significantly. Both buyers and developers shall get benefitted from this,” said Pradeep Jain, chairman, Confederation of Real Estate Developers’ Association of India (CREDAI).
Home loan buyers are currently paying a higher rate of interest in the range of 11.50-13 percent on floating basis. Customers, who had earlier opted for dual rate scheme and now just exhausted their fixed tenure rate, are paying the same rate of interest.
Other industry players like Unitech and real estate consultancy firm Cushman & Wakefield also welcomed the move, which they said would boost business confidence.
“This development will have a positive impact across the economy and particularly in the real-estate industry. Not only will the cost of borrowing rationalize, this reduction will also provide an impetus to growth and enhance business-confidence,” said Ajay Chandra, managing director, Unitech.
Cushman & Wakefield India said that the banks are expected to pass on the reduction in interest rates to consumers, which will provide a positive boost to market sentiments especially in the residential sales markets.
“We expect to witness some pickup in the volume of sales transactions. For the whole of last year, end buyers had to defer their purchase decisions as they were facing the double-edged sword of rising interest rates and stubborn price levels,” said Anurag Mathur, managing director, Cushman & Wakefield.
The RBI’s announcement also buoyed the BSE Realty index which grew by 32.50 points at 1,813.97 points around 2:50 p.m. Stocks of realty industry players also surged with DLF’s scrip growing by 3.75 points or 1.88 percent at 203.25 points.
Realty firms on Tuesday hailed the RBI’s decision to cut short-term lending rate saying the move would reduce the cost of funds to home buyers as well as developers and boost property demand.
“Reserve Bank’s decision to cut the repo rate by 50 basis points and abolish pre-payment penalties is a good move for home buyers,” Confederation of Real Estate Developers Association of India (CREDAI) Chairman Pradeep Jain said. In its annual credit policy, RBI has asked banks not to levy foreclosure charges or pre-payment penalties on home loans extended on a floating interest rate.
The country’s largest realty firm DLF also welcomed the decision, saying it would significantly improve the cash flows of developers. “It is positive news although very-very delayed. This will benefit home buyers besides the industry. It will improve cash flows tremendously,” DLF Group Executive Director Rajeev Talwar said.
Jain too said that liquidity for developers would improve and cost of funds would be cheaper. On demand, Credai Chairman said the move would definitely boost housing demand. However, property consultant DTZ India CEO Anshul Jain felt more measures need to be taken to have a positive impact on housing demand.
“It is a step in right direction although lot more measures need to be taken before we see any effect of the rate cut on the real estate sector,” said Jain of DTZ. The housing demand, which is very subdued currently, would only rise if the interest rates on home loans come down to below 10 percent, he added.
The real estate developers on Thursday reacted sharply to the Bhubaneswar Development Authority’s (BDA) move to change the definition of “apartment” and “group housing.”
Talking to reporters here, Confederation of Real Estate Developers Association of India (CREDAI) state president D S Tripathy said the new definitions are vague and will result in the harassment of people while constructing houses.
The draft BDA (planning and building standards) amendment regulations-2012 proposes to amend the definition of apartment as building constructed in one block having more than four dwelling units where land is owned jointly and construction is undertaken by one agency. Under the existing BDA regulations 2008, an apartment is defined as a building having six or more dwelling units.
Tripathy said under the new definition houses of joint families may become apartments. As a result, such families would have to meet the required road width of minimum nine metres, he said. Tripathy said certain apartments can never form societies for which at least seven members are required. Similarly, the new definition of ‘group housing,’ building with more than one dwelling unit, where land is owned jointly and the construction is undertaken jointly by one agency, is vague and don’t convey clarity.
CREDAI, which suggested its comment on the draft regulations, open for public suggestions, is of the view that creation of the new “settlement fund” and earmarking of 10% of all housing projects for economically weaker sections is not going to help the poor. “It seems impractical that BDA will construct EWS houses using shelter fund,” the CREDAI chief said.
The CREDAI, Odisha, suggested that the state government should formulate an affordable housing policy on the lines of Rajasthan, which looks more realistic, gives incentives to builders and subsidy to weaker sections.
Simplify administrative procedures, introduce land reforms and changes in banking and taxation systems is the way to increase construction of houses, according to Mr Lalit Jain, National President of Confederation of Real Estate Developers Association of India (CREDAI). The developers have decided to make a representation to the Central Government on the issue of administrative reforms.
The governing council of the industry body will follow up on its representation, and in 45 days decide on further course of action, including going on strike, according to a press release from the confederation. The release said Mr Jain, addressing the annual governing council meeting in Pune, said the changes are needed to encourage the construction business. This will help increase the supply of houses and bring down costs. The Government and the private sector should partner to address the shortage in housing.
The real estate developers have been demanding the changes as they maintain that delays in getting project clearances, high land cost, high rates of taxation and shortage of funds in the real estate sector are driving up the cost of construction. The real estate developers’ organisation has emerged the main representative for the sector, as its membership includes more than 6,000 developers across 20 States and 100 associations in major cities in India.
Mr Pradeep Jain, National Chairman of CREDAI, said the industry body is encouraging self-regulation, by demanding its members to adopt a uniform code of conduct. The members discussed a range of issues that needed to be addressed, including the need for an affordable housing policy, undue delays in approvals, price rise, and standardising procedures across various States.
CREDAI is committed to disclosing the exact cost of a project, once the single-window clearance for approvals is set in place. Each developer will be required to mention the complete cost in each sale. In agreements with buyers, the developers must mention carpet areas in all sale material and agreements; each city unit will establish a consumer redressal forum for dispute resolution. Peer pressure and better understanding between buyer and seller helps resolve issues and save on cost and time for both parties and re-establish goodwill.
When it comes to ease of approval and a good bureaucratic set up for real estate, Bihar seems to be better opportunity than Maharashtra, according to Lalit Kumar Jain, real estate tycoon and president of Confederation of Real Estate Developer’s Association of India (CREDAI). Jain was speaking to DNA against the backdrop of the first ever all India CREDAI meeting to be held in Pune from Wednesday.
“In Bihar, the bureaucratic setup to get necessary sanction allows us to complete our projects on time. Thanks to the organised system there, the end buyer also pays less for real estate compared to Maharashtra,’’ he said.
The two-day conference, will discuss amongst other things, the various challenges faced by the industry in terms of approvals, government’s decision to reserve 20%flats for economically weaker section of society and other issues.
While commenting about various problems facing the industry, Jain saidthe apparent delay in the process of getting sanctions for the projects was a major concern. “In case, the sanctions are delayed, the cost of the project escalates which results in a burden on the customer,’’ he said.
The decision of the state government to compulsorily reserve 20% of the flats for economically weaker sections of society according to Jain would be have a negative effect on the industry. “To compromise on this, the builder will pass on the cost to other buyers who will feel the pinch,’’ he said.
The government has proposed one per cent TDS (tax deduction at source) on transfer of immovable property if the sale value exceeds Rs 50 lakh in urban centres and Rs 20 lakh in other areas.
Finance Minister Pranab Mukherjee said in his Budget speech that the measure is proposed in the Budget and is being taken to “deter the generation and use of unaccounted money.” Immovable properties, other than agricultural land would be covered under the new provision.
The application of TDS would be effective from October 1 this year. It has been provided that transfer of property would not be registered unless the buyer furnishes proof of deduction and payment of TDS.
At present, tax is required to be deducted at source by the transferee on transfer of immovable property by a non- resident. But, there is no such requirement on transfer of such property by a resident except in few cases, it added.
Reacting to the proposal, the apex realty body CREDAI said that this would lead to increase in property prices.
“It looks like that the proposal of TDS would apply on transactions in the secondary market and not on sale of builder’s flat,” Confederation of Real Estate Developers’ Association of India (CREDAI) Chairman Pradeep Jain said.
The new proposal intends to collect tax at the earliest point of time and have a reporting mechanism of transactions in the realty sector.
The provision would apply if the consideration exceeds Rs 50 lakh if property is situated in “specified urban agglomeration” and Rs 20 lakh if property is situated in any other area.
According to CREDAI, the Confederation of Real Estate Developers Association of India, due to the application of service tax as per the union budget 2010, the property prices will experience an increase.
All of us are aware of the fact that this service tax has come into effect since July 1. For those who don’t, a quick recap says that an introduction of “deeming provision” took place in Union Budget 2010 which brought realty within the horizon of service tax.
According to the president of CREDAI, Mr Chitty Babu, there will be an increase of around 2.5% in property prices on account of the levy. Additional to this, in locations like Tamil Nadu where land registration and sale of building are done separately, a hiatus of 66.3% has been granted, thus, service tax will be applicable on the balance.
Finally, this whole tax would come just on the shoulders of buyers. This fact has even been admitted by some developers that they would charge extra from the buyers themselves to pay this tax.