Face to face: Booming times ahead
Rohtas Goel, chairman-National Real Estate Development Council (NAREDCO) & CMD-Omaxe Ltd, tells Niranjan Mudholkar that the Indian real estate will soon regain its position of supremacy
The government did not offer immediate and direct relief to the housing sector in its economic stimulus package. What steps do you think the government should take?
While we praise this move by the government, we expect more sops from banks to revive the housing sector. The current step is favourable for affordable housing in suburban areas. The idea of raising the upper limit to Rs30 lakh from Rs20 lakh will definitely attract more investors.
Since most home loans fall in the Rs20-50 lakh range, the relief package should have provided benefits to this segment of borrowers to give a push to realty. Banks should have reduced interest rates for loans up to Rs50 lakh to 9%, up to Rs30 lakh to 7.5% and up to Rs5 lakh to 6%.
Also we urge the government to take steps to bail out developers seeing lower sales in existing projects. It must be remembered that the crunch of the recession is not only faced by realtors but also by related 250 support industries.
The construction industry in India employs more than 30 million people. The economic crisis has compelled many firms to resort to salary and job cuts. Reportedly, you personally have taken a 50% pay cut. Do you see the economy improving?
We believe that as the property market bottoms out it will become increasingly polarised between the rich able to snap up bargains, and those in negative equity unable to participate and left further behind when prices take off again.
The credit crunch will soon become a distant memory after prices of houses bounce back. A mix of easier mortgage lending, a more benign approach to repossessions will make the recovery swifter. The cash-rich buyers have returned to auction rooms now that competition from amateur landlords armed with cheap buy-to-let finance has faded away.
We believe that FDI in real estate sector will increase in coming time. The Indian real estate will regain its position of supremacy and boom in times to come. The real estate business will continue to remain a good medium for long-term investment.
NAREDCO has asked its members to reduce rates on projects. How many have done this and to what extent?
NAREDCO, being an apex organisation, has requested all its members to offer 1-5% discount on basic sale price of existing projects.
The percentage depends on the project size, type and location. The cut will be for customers who pay on the basis of the progress of construction. We are also offering a 5-10% discount to customers on new projects announced. Our margins are already squeezed. We have also implemented the price cuts with immediate effect.
Given the adverse economic conditions across the globe, the price cut is a step in the right direction. It is an effort to share the burden of increasing home loans and interest rates and rising inflation.
The developers will absorb this price cut to provide suitable and affordable housing options to customers. If the developers have already reduced their margins, then it’s their choice to further reduce prices or not. As an apex industry body, it is our duty to advice members.
Many developers are looking at the affordable housing option. You too are quite active on this front with NAFHIL. Will this boost the industry in the next five years?
We believe that affordable housing is the demand of the time. Our upcoming affordable homes for the low-income group should help realise the dreams of the lower income group of the society.
Do you see high-end residential houses re-emerge? What will drive growth for the real estate sector?
Non-residential Indians (NRIs) are keen on buying luxurious properties in India. The growing breed of wealthy global Indians in the past few years are willing to pay as long as they get what they want. At a time when the US and European economies are spiralling downwards, the domestic economy in general is looking up.
The return on investment provided by real estate has been found to be more attractive than those of developed nations. Rich investors prefer to take a futuristic view. They see the downturn as an opportunity to invest in land or in developed areas which they can avail of at a discount. Moreover, the interest shown by NRIs has been increasing by 20-25% every quarter. The interest is not only by NRIs in the Gulf, but even from UK and the USA.
How should the industry re-strategise to come out of the slump? What steps must be taken if the industry is to achieve its full potential?
The turmoil is largely driven by global markets and sentiments. We feel the challenge lies in gearing ourselves to reduce financial dependence on global funds. Talking about growth, it cannot be denied that this sector still shows a favourable growth rate, although the pace has taken a beating. We believe the real estate sector still holds prime importance as the most lucrative investment option on a long term basis and will continue to do so.
National Real Estate Development Council (NAREDCO) was established in 1998 under the aegis of Union Ministry of Housing & Urban Poverty Alleviation (government of India) for the development and promotion of the housing and real estate sector in India. As the nodal agency for the sector in India, NAREDCO’s activity ranges from legislative, legal and regulatory issues to commercial issues in the sector.