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Anand Gupta of BAI has a bullish outlook for the real estate sector in the near future. However, certain factors ailing the industry must be rid of, he tells Rajesh Kulkarni.

The ongoing slowdown in the construction and real estate market has not done much to dampen the spirit of Anand Gupta, honorary secretary (All India), Builders Association of India (BAI). 

The current downturn and global economic turmoil notwithstanding, Gupta predicts a ‘very bright future’ ahead for the industry.

He says, “The massive Rs20 lakh crore investments in infrastructure development planned by the Government of India in its eleventh Five-year plan (2007-2012). The housing sector in urban areas will also witness growth riding the huge demand created by the burgeoning middle-class. With the overall economy likely to maintain its growth rate of approximately 8%, the demand for quality real estate options is likely to grow even further.”

According to Gupta, the dismal infrastructure scenario in the country will witness a major transformation as per the plans outlined in the country’s eleventh Five Year Plan.

“The government will invest about Rs2 lakh crore towards building and improving the road network, while sea ports and airports have each been allocated approximately Rs50,000 crore. Furthermore, many other airports and ports are either under expansion or construction across the country. In addition, the railways are going to start a dedicated 1500 kms freight corridor connecting Manesar (Haryana) and JNPT (Maharashtra) that will run through Haryana, Uttar Pradesh (UP), Rajasthan, Gujarat and Maharashtra. Similarly, the Eastern freight corridor will begin from Delhi and run through UP, Jharkhand, Bihar and West Bengal. Both these high speed corridors are expected to cost about Rs30,000 crore. This would be in addition to the expenditure borne by the railways on issues like track conversion, building bridges and so on.”

Improvements on the power generation front are also an integral part of this agenda. “The Energy Ministry has also approved three mega power projects that are expected to generate 4,000 mega watts of power each,” says Gupta. “These include a Tata Power project in Mundra (Kutch) and two Reliance Power projects in Sasan (Madhya Pradesh) and Krishnapatnam (Andhra Pradesh).”              

Having said that Gupta is quick to add that there are negative factors that are simultaneously hindering the rapid growth of the construction and real estate sectors. “Growth in the construction industry has been sluggish largely due to an acute shortage of engineers,” he reveals. Universities churn out about 4,70,000 engineers every year of which roughly 70% are absorbed by the information technology and ITeS segments leaving just 30% to be shared by other sectors including construction.

“Moreover, as the industry goes in for increased mechanisation, the shortage of skilled workers such as masons, carpenters, wire benders, supervisors, crane operators, excavators and compressors is also being increasingly felt,” adds Gupta.

Quizzed about the key industry initiatives implemented by the BAI in recent times, Gupta says, “We have asked our members to help impart training to unskilled labourers via the Industrial Training Institutes, which the government wants to privatise. We are also in talks on key legal issues like labour and taxation laws with the relevant departments to ensure that the needs of the construction industry are voiced and acted upon.

“More importantly, we have written a detailed letter to all Members of Parliament of both Houses emphasizing on the need to form a dedicated ministry for the construction industry and recommending the same to the Prime Minister at the appropriate forum.”

Veering the conversation to the rapid price fluctuations witnessed by the steel and cement sectors in the recent past, Gupta says: “With regard to cement prices, 2008-09 is likely to witness an increased production of about 20 million tonnes, thereby creating a surplus. This is expected to bring down prices of cement considerably. The rise in steel prices was a reflection of global trends. However, global steel prices have since come down and we expect that to reflect here as well. There is however a need for the price situation to be reviewed constantly.”

Gupta is also in favour of having a regulatory mechanism in place to ensure added transparency and accountability in the functioning of industry players and to improve the image of the industry as a whole. “However we do not require a regulatory body comprising only government officials,” he stresses. “Ideally it should include a mix of town planners, architects, real estate and infrastructure developers and government officials.

Moreover to ensure its efficiency, it should be free from the typical red tape of the government system.”

On the need to further streamline the transaction end of the real estate market, Gupta says that there have been positive changes on this front with the coming of foreign players, FIIs and tighter norms to check malpractices.

“The real estate market has undergone a major transformation in terms of clear deals and clear legal titles of properties. Due to involvement of financial institutions in giving loans to developers as well as individuals, there is a good amount of dirt filtering even before the properties reach the retail counters for sale.”

According to him, it is in the interests of developers and property owners to ensure that their titles are absolutely clear and free from any legal complications. “End users and investors alike insist on complete clarity on these key parameters. Furthermore, local municipal corporations are also adopting a very cautious approach and only clearing proposals after ascertaining the legal title of the properties. It has now become practically compulsory for all property transactions to be registered with the Registrar’s Office which has helped in encouraging clear transactions.”

Closer home, Gupta is quite vociferous in his support of the recent Supreme Court judgement upholding the Development Control Rules (33)7 for Mumbai. “It’s a landmark ruling that will benefit approximately 20 lakh residents residing in about 16,500 buildings across the island city. Apart from this, it is going to help owners, state and local self government officials to offer better infrastructure facilities thereby improving the general living conditions for people of this mega city. This judgement also brings Mumbai one step closer in its transformation into Shanghai as proposed by the state government on numerous occasions.”

Looking ahead Gupta lists information technology, entertainment and financial services as the key sectors that will influence demand and impact the future growth of the domestic real estate industry. He says, “IT with its huge demand for office and residential space, it already forms an important part of the real estate industry. If the value of Indian rupee appreciates, it’s boom time for the IT industry and consequently for the real estate sector in terms of an increased demand for space. The same is applicable vice-versa.

“The entertainment industry is also on a growth curve and is increasingly on the lookout for studio and commercial space to accommodate their business needs. This has also helped to drive demand for the real estate industry,” adds Gupta. “The same holds good for the finance sector as well with an increased number of professionals being absorbed by Indian and foreign financial and banking institutions in recent years.” 

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